Order dated 20.03.2009 - Tamil Nadu Electricity Regulatory ...
Order dated 20.03.2009 - Tamil Nadu Electricity Regulatory ...
Order dated 20.03.2009 - Tamil Nadu Electricity Regulatory ...
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1. Introduction<br />
This Tariff <strong>Order</strong> is the second on wind energy. This<br />
order is a culmination of a consultative process spread over ten months<br />
beginning in July 2008. <strong>Tamil</strong> <strong>Nadu</strong> being a pioneer in wind energy generation,<br />
the Commission has analysed the connected issues in great depth before<br />
finalising this comprehensive tariff order.<br />
1.1 The importance of Renewable Energy Sources<br />
Global concern over pollution and several related<br />
issues caused by the increase in green house gas emission and consequent<br />
changes in climate have resulted in a paradigm shift in the approach towards<br />
development of the energy sector in many countries. The need for adoption of<br />
clean technology, improving end use efficiency and diversifying energy bases<br />
etc., have all been seriously considered by the Government of India since the<br />
Sixth Five Year Plan and the country is poised for a considerable increase in the<br />
use of renewable energy sources in its transition to a sustainable energy base.<br />
Renewable energy sources such as wind, solar, hydro and biomass not only<br />
augment energy generation but also contribute to improvement in the quality of<br />
the environment, drought control, energy conservation, employment generation,<br />
upgrading of health and hygiene, social welfare, security of drinking water,<br />
increased agricultural yield and production of bio-fertilizers. The pace of<br />
development has been accelerated by the Government through promotional<br />
policies and fiscal and tax incentives.<br />
1.2 Power Procurement from New and Renewable Energy Sources of<br />
Energy Regulations 2008<br />
Section 61 of the <strong>Electricity</strong> Act 2003 (Central Act 36<br />
of 2003) stipulates that the State <strong>Electricity</strong> <strong>Regulatory</strong> Commission shall specify<br />
the terms and conditions for the determination of tariff. In accordance with the<br />
above stipulation, the Commission notified the “Power Procurement from New<br />
and Renewable Sources of Energy Regulations 2008” on 8-2-2008. It has been<br />
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specified in the above Regulation that the tariff determined by the Commission<br />
shall be applicable for a period of twenty years and the control period may<br />
ordinarily be two years.<br />
1.3 <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006<br />
The Commission notified <strong>Order</strong> No. 3 on “Power<br />
purchase and allied issues in respect of Non-Conventional Energy Sources<br />
based Generating Plants and Non-Conventional Energy Sources based Co-<br />
Generation Plants” on 15-5-2006. The said order stipulates tariff rates for power<br />
procurement by the distribution licensee from Wind Energy Generators (WEGs),<br />
biomass based generators and bagasse based co-generators. In the said order<br />
the Commission adopted a control period of three years. The next tariff revision<br />
would have been normally due on 15.5.2009.<br />
1.4 Representation for tariff revision<br />
For the past one year, the wind turbine<br />
manufacturers, wind energy developers and wind energy generators have<br />
repeatedly represented to the Commission that input costs such as capital cost,<br />
interest rates, maintenance cost, etc. have considerably increased during the last<br />
two years. They have been repeatedly requesting the Commission to revise the<br />
tariff ahead of the control period of three years, taking into account the<br />
escalation in input cost. During the last few years the capacity addition of wind<br />
generation in <strong>Tamil</strong> <strong>Nadu</strong> has shown a declining trend, whereas States like<br />
Gujarat have registered an increasing trend. Though there are many factors,<br />
which have contributed for the decline in capacity addition, it has been widely<br />
reported that the main factor for the decline in addition of wind energy capacity is<br />
the unattractive tariff in <strong>Tamil</strong> <strong>Nadu</strong>.<br />
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1.5 Commission’s initiative on tariff revision for NCES based generation<br />
In response to the repeated representations, the<br />
Commission conducted a round table conference on 16-7-2008 to elicit the views<br />
of wind energy experts, wind turbine manufacturers, wind energy developers and<br />
other stake holders. Officials from the Ministry of New and Renewable Energy<br />
Source (MNRE), Government of India, Indian Renewable Energy Development<br />
Agency Limited (IREDA), <strong>Tamil</strong> <strong>Nadu</strong> Energy Development Agency (TEDA) and<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board (TNEB) participated in the conference. Based on<br />
the views of the participants, the Commission decided to initiate the process of<br />
tariff revision for power procurement from wind energy generators.<br />
1.6 Commission’s order on relaxation of control period<br />
The Commission in its order <strong>dated</strong> 19-09-2008, in<br />
petitions M.P. Nos. 9, 14 & 23 of 2008 filed by Indian Wind Energy Association<br />
(InWEA) and others decided that “the control period of three years as specified in<br />
<strong>Order</strong> No. 3 <strong>dated</strong> 15.05.2006 is waived from the date of issue of this order”.<br />
2.0 Provisions of the <strong>Electricity</strong> Act 2003, National <strong>Electricity</strong> Policy and<br />
National Tariff Policy on NCES.<br />
2.1. Preamble of the <strong>Electricity</strong> Act 2003 reads as<br />
follows:<br />
“An Act to consolidate the laws relating to generation,<br />
transmission, distribution, trading and use of electricity and generally for taking<br />
measures conducive to development of electricity industry, promoting<br />
competition therein, protecting interest of consumers and supply of electricity to<br />
all areas, rationalization of electricity tariff, ensuring transparent policies<br />
regarding subsidies, promotion of efficient and environmentally benign policies<br />
constitution of Central <strong>Electricity</strong> Authority, <strong>Regulatory</strong> Commissions and<br />
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establishment of Appellate Tribunal and for matters connected therewith or<br />
incidental thereto.”<br />
2.2. Section 86 (1) (e) of the <strong>Electricity</strong> Act 2003<br />
states that the State Commission shall promote cogeneration and generation of<br />
electricity from renewable sources of energy by providing suitable measures for<br />
connectivity with the grid and sale of electricity to any person, and also specify,<br />
for purchase of electricity from such sources, a percentage of the total<br />
consumption of electricity in the area of a distribution licensee.<br />
2.3. Section 61 (h) of the <strong>Electricity</strong> Act 2003 states<br />
that the Appropriate Commission shall, subject to the provisions of this Act,<br />
specify the terms and conditions for determination of tariff and in doing so shall<br />
be guided by the following namely, (h) the promotion of cogeneration and<br />
generation of electricity from renewable sources of energy, (i) the National<br />
<strong>Electricity</strong> Policy and Tariff Policy.<br />
2.4. Related provisions of the National <strong>Electricity</strong><br />
Policy are quoted below.<br />
“5.2.20 Feasible potential of non-conventional energy<br />
resources, mainly small hydro, wind and bio-mass would also need to be<br />
exploited fully to create additional power generation capacity. With a view to<br />
increase the overall share of non-conventional energy sources in the electricity<br />
mix, efforts will be made to encourage private sector participation through<br />
suitable promotional measures.”<br />
“5.12.2 The <strong>Electricity</strong> Act 2003 provides that co-generation<br />
and generation of electricity from non-conventional sources would be promoted<br />
by the SERCs by providing suitable measures for connectivity with grid and sale<br />
of electricity to any person and also by specifying, for purchase of electricity from<br />
such sources, a percentage of the total consumption of electricity in the area of a<br />
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distribution licensee. Such percentage for purchase of power from nonconventional<br />
sources should be made applicable for the tariffs to be determined<br />
by the SERCs at the earliest. Progressively the share of electricity from nonconventional<br />
sources would need to be increased as prescribed by State<br />
<strong>Electricity</strong> <strong>Regulatory</strong> Commissions. Such purchase by distribution companies<br />
shall be through competitive bidding process. Considering the fact that it will take<br />
some time before non-conventional technologies compete, in terms of cost, with<br />
conventional sources, the Commission may determine an appropriate differential<br />
in prices to promote these technologies.”<br />
below:<br />
2.5. Para 6.4 of the National Tariff Policy states as<br />
“(1) Pursuant to provisions of section 86(1)(e) of the Act, the<br />
Appropriate Commission shall fix a minimum percentage for purchase of energy<br />
from such sources taking into account availability of such resources in the region<br />
and its impact on retail tariffs. Such percentage for purchase of energy should be<br />
made applicable for the tariffs to be determined by the SERCs latest by April 1,<br />
2006. It will take some time before non-conventional technologies can compete<br />
with conventional sources in terms of cost of electricity. Therefore, procurement<br />
by distribution companies shall be done at preferential tariffs determined by the<br />
Appropriate Commission.<br />
(2) Such procurement by Distribution Licensees for future<br />
requirements shall be done, as far as possible, through competitive bidding<br />
process under Section 63 of the Act within suppliers offering energy from same<br />
type of non-conventional sources. In the long-term, these technologies would<br />
need to compete with other sources in terms of full costs.<br />
(3) The Central Commission should lay down guidelines<br />
within three months for pricing non-firm power, especially from non–conventional<br />
sources, to be followed in cases where such procurement is not through<br />
competitive bidding.”<br />
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2.6. A reading of the National Tariff Policy, National<br />
<strong>Electricity</strong> Policy and the <strong>Electricity</strong> Act 2003 establishes the overwhelming<br />
emphasis on environmental friendly renewable sources of energy such as wind,<br />
hydel, solar and biomass. <strong>Tamil</strong> <strong>Nadu</strong> has been a pioneer in harnessing wind<br />
power, which has enabled the State to capture 4136 MW, which accounts for<br />
42.39 % of the capacity in the entire country as on 31-01-2009. This trend<br />
witnessed reversal during 2007-08 owing to the perceived adverse factors such<br />
as constraints on evacuation of wind energy, frequent load shedding and<br />
unremunerative tariff.<br />
2.7. We need to bear in mind that wind energy is<br />
cheap and environment friendly. It came to the rescue of the State during the<br />
difficult months of 2008. The Government of <strong>Tamil</strong> <strong>Nadu</strong>, the Commission and<br />
the TNEB have all along adopted progressive and forward-looking policies in<br />
regard to wind energy. It would be a tragedy to let the initiative slip out of <strong>Tamil</strong><br />
<strong>Nadu</strong>. Gujarat, Maharashtra and Karnataka are fast becoming destinations of<br />
wind energy investment. <strong>Tamil</strong> <strong>Nadu</strong> should strive its best to retain the<br />
leadership in this field.<br />
2.8. Yet another factor, which is to be borne in mind<br />
is that while thermal generation plants take three to four years to mature, wind<br />
energy generators require just three to six months to install their capacity.<br />
Considering the difficult times ahead during the next three years, it is essential<br />
that the State adds capacity quickly, even discounting the fact that wind energy is<br />
available only for six months in a year.<br />
3.1 Wind Power Scenario<br />
3.1.1. Total installed capacity of power generation in<br />
the country is 1, 47,458 MW as on 31-1-2009. The contribution of NCES power<br />
to the country’s installed capacity is around 13,242 MW out of which the<br />
contribution of wind power is 9756 MW as on 31-1-2009. (Source: Central<br />
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<strong>Electricity</strong> Authority) The NCES power represents 9% and wind power 6.6% of<br />
the total installed capacity. The installed capacity of wind power in different<br />
States as on 30-11-2008 is furnished below:<br />
State Potential<br />
( MW )<br />
Installed<br />
Capacity ( MW)<br />
Percentage<br />
to the total<br />
Andhra Pradesh 8968 122.50 1.29<br />
Gujarat 10645 1433.50 14.95<br />
Karnataka 11531 1184.00 12.35<br />
Kerala 1171 12.50 0.13<br />
Madhya Pradesh 1019 187.70 1.96<br />
Maharashtra 4584 1838.00 19.17<br />
Rajasthan 4858 671.00 7.00<br />
<strong>Tamil</strong> <strong>Nadu</strong> 5530 4133.00 43.11<br />
Others 705 4.30 0.04<br />
TOTAL 49011 9586.50 100.00<br />
(Source: MNRE and www.windpowerindia.com)<br />
3.1.2. Harnessing of wind energy is highest in<br />
<strong>Tamil</strong> <strong>Nadu</strong> with an installed capacity of 4136 MW, contributing 42.39% of the<br />
country’s total installed capacity of around 9756 MW as on 31-1-2009. The<br />
following locations are endowed with favourable wind flow:-<br />
Name of the<br />
Area<br />
Passes/Districts<br />
Palghat<br />
Coimbatore, Erode and Dindigul<br />
Shencottah<br />
Tirunelveli and Tuticorin<br />
Aralvoimozhi Kanyakumari, Radhapuram and Muppandal<br />
Theni District Theni, Cumbum and Andipatty<br />
Sea coast<br />
Uvari, Tuticorin, Rameswaram, Poompuhar and<br />
Ennore<br />
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3.1.3. The year wise capacity addition in <strong>Tamil</strong> <strong>Nadu</strong><br />
over the past 10 years is furnished below:<br />
Year<br />
Capacity addition (MW)<br />
Up to1998-99 728<br />
1999-00 46<br />
2000-01 42<br />
2001-02 45<br />
2002-03 133<br />
2003-04 371<br />
2004-05 675<br />
2005-06 858<br />
2006-07 577<br />
2007-08 381<br />
2008-09 (up to 31-01-2009) 280<br />
Total as on 31-1-2009 4136<br />
(Source: TEDA & TNEB)<br />
3.1.4. The steady increase in capacity addition of<br />
wind power generation in <strong>Tamil</strong> <strong>Nadu</strong> is mainly attributed to the favourable<br />
meteorological and topographical conditions and the pro-active policies of the<br />
Government of <strong>Tamil</strong> <strong>Nadu</strong>.<br />
3.2 Generation – Demand gap in <strong>Tamil</strong> <strong>Nadu</strong><br />
3.2.1. The generating capacity connected to TNEB’s<br />
grid including the allocation from Central Generating Station is 10214.55 MW as<br />
on 31.01.2009 comprising 2970 MW from TNEB’s four thermal stations, 516 MW<br />
from four gas turbine stations, 2187 MW from 33 hydro stations, 17.55 MW from<br />
TNEB’s wind farm, 1180 MW from private sector power projects, 214 MW as<br />
contribution to <strong>Tamil</strong> <strong>Nadu</strong> grid by sale of electricity from captive generating<br />
plants, 2825 MW as <strong>Tamil</strong> <strong>Nadu</strong>’s share from central generating stations and 305<br />
MW from external assistance.<br />
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3.2.2. Generating capacity from privately owned wind<br />
farms is 4119 MW. The installed capacity of cogeneration in sugar mills is 466.10<br />
MW and that of biomass project is 147.55 MW.<br />
3.2.3. The average power availability during 2008-09<br />
has been about 8000 MW, while the peak demand has been about 9500 MW,<br />
which leaves a deficit of about 1500 MW. Since the infirm wind generation<br />
contributes about 15% to 20% of the peak demand during wind season as TNEB<br />
has no standby capacity to take care of this infirm power fully, in case of<br />
unexpected meteorological changes, the deficit rises to 2000 MW. This deficit is<br />
likely to increase in the next few years since the capacity addition is expected to<br />
be less than the projected increase in demand. Therefore, any addition of wind<br />
power generation will help the State to a great extent to tide over the shortage of<br />
power.<br />
4. Applicability of this <strong>Order</strong><br />
<strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006 of the Commission lays<br />
down a control period of three years for that order and therefore normally the<br />
next order should have taken effect from 15-5-2009. The Commission in the<br />
Common <strong>Order</strong> in M.P.Nos.9, 14 and 23 of 2008 <strong>dated</strong> 19-9-2008 has ruled that<br />
the control period of three years specified in order No.3 <strong>dated</strong> 15-5-2006 is<br />
waived from the date of issue of that order. The control period of three years,<br />
thus, stands terminated on 19-9-2008. Therefore, the Commission holds that all<br />
the wind energy generators commissioned on or after 19-9-2008 shall become<br />
eligible for the benefits of the present order, subject to the condition that the<br />
monetary benefits shall accrue from the date of this order. The existing<br />
agreements between the wind energy generators and the distribution licensee<br />
shall continue to be valid. The parties to the agreement are at liberty at any time<br />
to renegotiate the existing agreement mutually in accordance with this order. The<br />
agreements between the wind generators and the distribution licensee in relation<br />
9
to all machines commissioned on or after 19-9-2008 shall be in conformity with<br />
this order.<br />
5. Tariff Determination Process<br />
5.1. Clause 4 of the Power Procurement from New<br />
and Renewable Sources of Energy Regulation, 2008 reads as follows:-<br />
The Commission shall follow the process mentioned<br />
below for the determination of tariff for the power from new and renewable<br />
sources based generators, namely;-<br />
a) initiating the process of fixing the tariff either suo motu or on an application<br />
filed by the distribution licensee or by the generator.<br />
b) inviting public response on the suo motu proceedings or on the application<br />
filed by the distribution licensee or by the generator.<br />
c) conducting public hearing on the above.<br />
d) issuing general / specific tariff order for purchase of power from new and<br />
renewable sources based generators.<br />
5.2. The Commission in its order <strong>dated</strong> 19-09-2008,<br />
in the petitions M.P. Nos. 9, 14 & 23 of 2008 filed by the Indian Wind Energy<br />
Association (InWEA) and others, have ordered that “the prayer for revising the<br />
tariff for the NCES generators would be considered by the Commission<br />
separately”. In continuation of the above order, the Commission issues this order.<br />
6. Tariff / Pricing Methodology<br />
The Tariff / Pricing Methodology specified in Clause 4<br />
of the Commission’s above said Regulation is reproduced below.<br />
(2) While deciding the tariff for power purchase by distribution licensee from new<br />
and renewable sources based generators, the Commission shall, as far as<br />
possible, be guided by the principles and methodologies specified by:<br />
(a) Central <strong>Electricity</strong> <strong>Regulatory</strong> Commission<br />
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(b) National <strong>Electricity</strong> Policy<br />
(c) Tariff Policy issued by the Government of India<br />
(d) Rural Electrification Policy<br />
(e) Forum of Regulators (FOR)<br />
(f) Central and State Governments<br />
(3) The Commission shall, by a general or specific order,<br />
determine the tariff for the purchase of power from each kind of new and<br />
renewable sources based generators by the distribution licensee………..<br />
Provided where the tariff has been determined by following<br />
transparent process of bidding in accordance with the guidelines issued by the<br />
Central Government, as provided under section 63 of the Act, the Commission<br />
shall adopt such tariff.<br />
(4) While determining the tariff, the Commission may, to the<br />
extent possible consider to permit an allowance / disincentive based on<br />
technology, fuel, market risk, environmental benefits and social impact etc., of<br />
each type of new and renewable source.<br />
(5) While determining the tariff, the Commission shall adopt<br />
appropriate financial and operational parameters.<br />
(6) While determining, the tariff the Commission may adopt<br />
cost plus single part average tariff which can be reviewed later.<br />
6.1 Preferential Tariff vs. Bidding<br />
6.1.1. At this juncture it is relevant to discuss the<br />
following stipulations of National Tariff Policy, which are reproduced below:<br />
Section 6.4(1): Pursuant to provisions of section 86(1)(e) of<br />
the Act, the appropriate Commission shall fix a minimum percentage for<br />
purchase of energy from such sources taking into account availability of such<br />
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esources in the region and its impact on retail tariffs. Such percentage for<br />
purchase of energy should be made applicable for the tariffs to be determined by<br />
the SERCs latest by April 1, 2006. It will take some time before non-conventional<br />
technologies can compete with conventional sources in terms of cost of<br />
electricity. Therefore, procurement by distribution companies shall be done at<br />
preferential tariffs determined by the appropriate Commission.<br />
Section 6.4(2): Such procurement by distribution licensees<br />
for future requirements shall be done, as far as possible, through competitive<br />
bidding process under Section 63 of the Act within suppliers offering energy from<br />
same type of non-conventional sources. In the long-term, these technologies<br />
would need to compete with other sources in terms of full costs.<br />
6.1.2. A view has been expressed by some<br />
stakeholders that competitive bidding process should be adopted for<br />
procurement of wind energy, although the dominant opinion was in favour of<br />
continuing the present preferential tariff. The cost of generation of wind energy<br />
generation is still higher than coal based generation. It will take quite some time<br />
before wind energy technology can compete with the conventional energy<br />
sources in terms of cost effectiveness. The Forum of Regulators, which is a<br />
body consisting of Chairmen of all State <strong>Electricity</strong> <strong>Regulatory</strong> Commissions and<br />
the Central <strong>Electricity</strong> <strong>Regulatory</strong> Commission considered this issue and has<br />
recommended that cost based tariff on reasonable norms should be permitted for<br />
renewable energy. The Commission endorses this recommendation of the<br />
Forum of Regulators and decides to continue the present system of preferential<br />
tariff.<br />
6.2 Single Part Tariff vs. Two Part Tariff<br />
Two-part tariff is generally adopted when the variable<br />
component is significant. In the case of wind energy generation, wind being the<br />
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motive force, variable generation cost is nil. Reduction in capacity utilization and<br />
variation in operation, maintenance and insurance cost could be taken care of by<br />
adopting suitable parameters. Therefore, the Commission proposes to adopt<br />
the single-part tariff for wind energy generation in accordance with Clause 4.6 of<br />
Power Procurement from New and Renewable Energy Sources Regulations<br />
2008.<br />
6.3 Project Specific Tariff vs. Generalized Tariff<br />
A generalized tariff mechanism would provide<br />
incentive to the investors for use of most efficient equipment to maximize returns<br />
and for selecting the most efficient site while a project-specific tariff would<br />
provide each investor, irrespective of the machine type and the site selected, the<br />
stipulated return on equity and it would shield the investor from the uncertainties<br />
involved in capacity utilization due to machine choice and the site location. In<br />
<strong>Tamil</strong> <strong>Nadu</strong>, so far, no wind farm developer has moved the Commission for<br />
project specific generation tariff. Capacity of most of the generators is limited to a<br />
few MWs. A view has been voiced by some stake holders pleading for project<br />
specific tariff. Some others suggested that as and when such occasion arises<br />
the Commission could take a view. The Commission decides that if a large<br />
promoter seeks a project specific tariff, that application could be considered<br />
separately subjecting it to the scrutiny of the Advisory Committee and the public<br />
hearing. We think that any promoter installing new capacity exceeding 200 MW<br />
within the same financial year may qualify for this dispensation.<br />
6.4 Cost plus, single part, average tariff<br />
The Commission’s order No. 3 <strong>dated</strong> 15-5-2006<br />
adopted the “cost plus single part average tariff”. This tariff order was challenged<br />
by Wind Power Producers Association before the Appellate Tribunal for<br />
<strong>Electricity</strong> (ATE). The ATE in its order <strong>dated</strong> 18-12-2007 against the appeal No<br />
205/2006 and 235/2006 have directed the Commission that “the tariff for the<br />
wind power producers be re-determined within the next two months by<br />
13
taking into consideration the time value of money”. The order of the ATE<br />
has been challenged by the Commission and the TNEB before the Hon’ble<br />
Supreme Court and the Hon’ble Supreme Court in its order <strong>dated</strong>:03-03-2008<br />
(against appeal Nos: 1361-1362 0f 2008) have stayed the order of the ATE.<br />
Therefore, the Commission decides to continue with the present methodology of<br />
cost plus, single part, average tariff.<br />
7.1 Components of tariff<br />
The following are the components of tariff for wind<br />
energy:-<br />
1. Capital investment<br />
2. Capacity utilization factor<br />
3. Debt-equity ratio<br />
4. Term of the loan<br />
5. Interest rate<br />
6. Return on equity<br />
7. Life of plant and machinery<br />
8. Depreciation of plant and machinery<br />
9. Operation and maintenance expenditure<br />
10. Insurance expenditure<br />
7.2 Capital Investment<br />
7.2.1. The estimates of capital investment show wide<br />
variation. The Centre for Wind Energy Technology (CWET), Government of<br />
India reported in their website at the time of preparation of the consultative paper<br />
that the capital cost ranges from Rs.4.5 to Rs.5.5 crores per MW depending on<br />
the site and the type of wind electric generator. This figure has been now scaled<br />
up to Rs.4.5 to 6.85 crores per MW. The website of <strong>Tamil</strong> <strong>Nadu</strong> Energy<br />
Development Agency (TEDA), entrusted with the task of promoting wind energy,<br />
reports a capital cost of Rs.5 to 6 crores per MW in their website. The website of<br />
Indian Wind Turbine Manufacturers Association mentions a figure of Rs.6.5<br />
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crores per MW. Indian Wind Power Association representing an installed<br />
capacity of 1500 MW suggests that the capital cost is in the range of Rs.6 to 6.5<br />
crores per MW. <strong>Tamil</strong> <strong>Nadu</strong> Spinning Mills Association which represents<br />
installed capacity of 1200 MW suggests a capital cost of Rs.5.4 crores per MW.<br />
Power Engineers Society of <strong>Tamil</strong> <strong>Nadu</strong> estimates that the cost cannot be more<br />
than Rs.2 crores per MW. TNEB suggests a capital cost of Rs.4 to 4.5 crores<br />
per MW. Thiru V. Sethuraman, Director, Neyveli Lignite Corporation opines that<br />
the capital cost of Rs.5.35 crores per MW is not high. Thiru T.B. Chikkoba, an<br />
expert on wind energy and a Member of the Advisory Committee opines that<br />
Rs.5 crores per MW is reasonable.<br />
7.2.2. The Ministry of New and Renewable Energy,<br />
Government of India has recommended a capital cost of Rs.5.5 to 5.7 crores per<br />
MW. This conforms to the views expressed by Thiru K.P. Sukumaran, Advisor,<br />
MNRE, Government of India in the Expert Committee meeting held on 15-7-<br />
2008. The Ministry of New and Renewable Energy Sources, Government of<br />
India in their letter <strong>dated</strong> 8-12-2008 have stated that the average capital cost is<br />
Rs.5.6 crores per MW. The Chairman and Managing Director of Indian<br />
Renewable Energy Development Agency (a public sector undertaking of the<br />
Government of India) has reported in his letter <strong>dated</strong> 2-12-2008 that the average<br />
capital cost is Rs.5.61 crores based on 36 applications received between April<br />
2007 and November 2008 aggregating to 442 MW. It is obvious that there are<br />
wide variations in the capital cost estimates.<br />
7.2.3. The Commission considers that the advice of<br />
the IREDA and the Government of India based on the recent applications is a<br />
reliable indicator of cost and therefore estimates that Rs.5.60 crores per MW is a<br />
reasonable figure. The Commission in its <strong>Order</strong> <strong>dated</strong> 19-9-2008 in M.P. No. 27<br />
of 2008 has ruled that in accordance with Sections 39 (2) (c), 40 and 42 (2) of the<br />
<strong>Electricity</strong> Act 2003 the infrastructure development charges of Rs.25 lakhs per<br />
MW should be borne by the distribution licensee and the State Transmission<br />
Utility (STU). Therefore, it is logical that the capital cost of Rs.5.60 crores per<br />
MW should be scaled down by Rs.25 lakhs per MW and fixed at Rs.5.35 crores<br />
15
per MW. The Commission, therefore, determines a capital cost of Rs.5.35 crores<br />
per MW. The Advisor, MNRE, Government of India has estimated that 85% of<br />
the capital cost is attributable to machinery cost, 10% for civil works and 5% for<br />
land cost. It is made clear that the distribution licensee and the State<br />
Transmission Utility shall provide the necessary infrastructure.<br />
7.3 Capacity utilization factor<br />
The capacity utilization of a wind turbine is a function<br />
of wind velocity, air density, power law index, mechanical efficiency of the<br />
machine, age of the machine, height of the hub and length of the blade. The<br />
Commission adopted a capacity utilization of 27.46% in order No.3 <strong>dated</strong> 15-5-<br />
2006 for new machines based on performance of the machines installed<br />
immediately before 15-5-2006. The capacity utilization figure has been<br />
determined by the Commission as the weighted average of the assessed<br />
generation of new machines in the Muppanthal, Shenkota, Palghat and Cumbum<br />
passes. The assessment of capacity utilization has widely varied from figure of<br />
21% suggested by <strong>Tamil</strong> <strong>Nadu</strong> Spinning Mills Association, 23% suggested by<br />
Indian Wind Power Association, 26.5% suggested by Indian Wind Energy<br />
Association and 27.15% recommended by TNEB. Mr.T.B. Chikkoba, an expert<br />
and Member of the Advisory Committee opines that 27.15% is on the high side.<br />
Having regard to the potential of four passes, the Commission estimates that<br />
capacity utilization figure of 27.15% for new machines is reasonable.<br />
7.4 Derating of machines<br />
Derating of a wind turbine is necessitated by its<br />
ageing. The Commission fixed the derating at 1% per annum after the first 10<br />
years in <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006. The Commission has collected data from<br />
the <strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board, Indian Wind Power Association and <strong>Tamil</strong> <strong>Nadu</strong><br />
Spinning Mills Association. Although the data shows declining performance of<br />
the machines, behaviour of the data over the time period is erratic. The<br />
Commission is unable to arrive at any definite conclusion based on the data and<br />
16
therefore decides to retain the existing formula on derating, although some<br />
stakeholders have pleaded for adoption of 1% derating after the first five years.<br />
We decide that the derating shall be 1% per annum after the first ten years.<br />
7.5 Debt : Equity Ratio<br />
The Tariff Policy lays down a debt equity ratio of 70 :<br />
30 for power projects. The Commission has adopted this ratio in the Tariff<br />
Regulations 2005 as well as in <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006. The Commission<br />
decides to retain the same ratio for this order.<br />
7.6 Term of Loan<br />
The Commission fixed the tenure of term loan as ten<br />
years with moratorium of one year in <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006 on the<br />
consideration that term loans sanctioned by IREDA stipulated this tenure. The<br />
Commission proposes to retain the same tenure.<br />
7.7 Rate of interest<br />
The IREDA, which is a major financier of<br />
renewable energy projects, has stated that interest rate of IREDA is in the range<br />
of 11.75% to 12.9%. The Indian Wind Power Association submits that apart from<br />
the IREDA, finances are secured from banks which charge interest rate of 13%<br />
to 13.5%. The <strong>Tamil</strong> <strong>Nadu</strong> Spinning Mills Association demanded interest rate of<br />
13.5% for loan from commercial banks. The Indian Wind Turbine Manufacturers<br />
Association pitches for interest rate of 13%. The TNEB considers that a rate of<br />
9% to 10% should be adequate on the ground that the public financial institutions<br />
should offer concession for renewable energy generators. However, this has not<br />
happened and there is no preferential rate of interest for renewable energy<br />
generators. The Commission considers that interest rate of 12% is reasonable.<br />
17
7.8 Return on equity<br />
7.8.1. <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006 prescribed a<br />
return on equity of 16% pre tax for wind energy projects, although the Tariff<br />
Regulations 2005 of the Commission provides 14% post tax return for<br />
conventional power projects (which works out to 17.63% pre tax on the<br />
assumption that minimum alternate tax of 10.3 % is payable during the first ten<br />
years and corporate tax of 30.9% is payable during the remaining ten years).<br />
The treatment meted out to renewable energy projects is less favourable than<br />
conventional power projects. Therefore the Commission proposed to offer 14%<br />
post tax return for wind energy projects equivalent to 17.63% pre tax.<br />
Subsequent to the preparation of the consultative paper the Central <strong>Electricity</strong><br />
<strong>Regulatory</strong> Commission has notified on 20 th January 2009 a return of 15.5% post<br />
tax effective from 1-4-2009. The equivalent of 15.5% post tax would be 19.85%<br />
pre tax. The stakeholders have put forth demands for post tax return of 16% and<br />
15.5%.<br />
7.8.2. The TNEB is not in favour of converting the<br />
post tax return to a pre tax return. Although there is limited validity in their plea, it<br />
will be difficult in practice to assess the actual tax liability of about 8000 wind<br />
generators. Therefore, it would be more practical to determine a pre tax return<br />
on equity, particularly in the case of small renewable energy generators. The<br />
concept of post tax return can be conveniently implemented in huge conventional<br />
power projects. Therefore, the Commission decides that 17.63% pre tax return<br />
on equity may be allowed upto 31-3-2009 and 19.85% pre-tax return on equity<br />
may be allowed after 31-3-2009 for this order.<br />
7.9 Life period<br />
The Commission has considered a plant life of 20<br />
years in the <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006. The Commission proposes to retain<br />
the same life period for this order.<br />
18
7.10 Rate of Depreciation<br />
It is proposed to depreciate the value of the plant and<br />
machinery to 10% of the initial value during the life period of 20 years. This<br />
translates to a rate of 4.5% per annum in the straight line method. The<br />
Commission proposes to retain the rate of 4.5% per annum adopted in the <strong>Order</strong><br />
No.3 <strong>dated</strong> 15-5-2006 with the modification that depreciation shall be calculated<br />
on 85% of the capital investment, which represents the cost of plant and<br />
machinery.<br />
7.11 Operation and Maintenance expenses<br />
Presently operation and maintenance expenses is<br />
charged as a percentage of the capital investment. The Commission would like<br />
to modify this practice to lay down that 85% of the capital investment, being the<br />
plant and machinery cost, may be reckoned as the basis for calculating O & M<br />
expenses. The present rate of 1.1% per annum is retained. Escalation of 5%<br />
may commence from the second year. With regard to maintenance of land and<br />
civil works, which constitute 15% of the capital investment, 0.22% of the 15%<br />
may be allowed every year.<br />
7.12 Insurance<br />
The Commission proposes to modify the existing<br />
procedure of computing insurance charges. Insurance charges will be computed<br />
with reference to 85% of the capital investment, which represents the cost of<br />
plant and machinery. The Commission proposes an insurance rate of 0.75% of<br />
the machinery cost for the first year to be reduced by half a percent of the<br />
previous year’s insurance cost every year thereafter.<br />
8.1 Related issues<br />
The following are the issues related to wind energy<br />
generation, transmission and wheeling and consumption:<br />
19
1. Banking<br />
2. Transmission and wheeling charges<br />
3. Cross subsidy surcharge<br />
4. CDM benefits<br />
5. Reactive power charges<br />
6. Grid availability charges<br />
7. Adjustment of energy generated<br />
8. Scheduling and system operation charges<br />
9. Application fees and Agreement fees<br />
10. Billing and payments<br />
11. Payment security and Security deposit<br />
12. Power factor incentive / disincentive<br />
13. Metering<br />
14. Evacuation of wind energy<br />
15. Energy purchase agreement<br />
16. Energy wheeling agreement<br />
17. Renewable energy purchase obligation<br />
18. Control period<br />
8.2 Banking<br />
8.2.1. Banking as a concept was introduced by the<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board in 1986 to encourage generation of wind energy.<br />
The banking charge was fixed at 2% in 1986 and raised to 5% in 2001. The<br />
figure remained at 5% when the Commission issued order No.3 <strong>dated</strong> 15-5-2006.<br />
The banking period was fixed at one month in March 2001 by the TNEB and<br />
doubled in September 2001. It was further raised by TNEB to one year in March<br />
2002 commencing from 1 st April and ending on 31 st March of the following year.<br />
8.2.2. The banking charges shall be realized every<br />
month for the quantum of units generated during the billing month less the<br />
20
consumption of the captive users / third party sale. Slot-wise banking is<br />
permitted to enable unit to unit adjustment for the respective slots towards rebate<br />
/ extra charges. No carry over is allowed beyond the banking period. Unutilised<br />
energy at the end of the financial year may be encashed at the rate of 75% of the<br />
relevant purchase tariff. The Commission proposes to retain the same features<br />
with some modifications based on the suggestions made by the stakeholders.<br />
As and when the distribution licensee enforces restriction control measures for<br />
restricting the consumption of wind energy generators, the Commission finds<br />
justification in the plea that the unutilized energy at end of the financial year may<br />
be encahsed at full value of the relevant tariff for sale to the licensee. The plea<br />
of the TNEB to raise the banking charge from 5% to 15% and curtail the banking<br />
period from one year to one month are too radical to be accepted by the<br />
Commission.<br />
8.2.3. Therefore, the Commission decides to retain<br />
banking charges at 5%. Banking charges will be levied on the net energy saved<br />
by the generator in a month after adjustment of the consumption during that<br />
month. The banking period commences on 1 st April and ends on 31 st March of<br />
the following year. The energy generated during April shall be adjusted against<br />
consumption in April and the balance if any shall be reckoned as the banked<br />
energy for April. The generation in May shall be first adjusted against the<br />
consumption in May. If the consumption exceeds the generation during May, the<br />
energy banked in April shall be drawn to the required extent. If the consumption<br />
during May is less than the generation during May, the balance shall be reckoned<br />
as the banked energy for May and banking charges for May will be leviable only<br />
for this component. This procedure shall be repeated every month. The following<br />
illustration would clarify the above formula.<br />
21
Case I<br />
Month<br />
Illustration (8.2.3)<br />
Generat Trans. & Net Consumption Banking Banking Withdrawal Net Cumulative<br />
ion Wheeling available<br />
for the Charges from bank energy balance in<br />
Charges for<br />
month @ 5%<br />
banked the bank<br />
@ 5% captive<br />
for the<br />
use<br />
month<br />
(units) (units) (units) (units) (units) (units) (units) (units) (units)<br />
April 110000 5500 104500 84500 20000 1000 0 19000 19000<br />
May 84000 4200 79800 70000 9800 490 0 9310 28310<br />
June 100000 5000 95000 115000 0 0 20000 0 8310<br />
Case II<br />
Month<br />
Generat<br />
ion<br />
Trans. &<br />
Wheeling<br />
Charges<br />
Net<br />
available<br />
for<br />
Consumption Banking<br />
for the<br />
month<br />
Banking<br />
Charges<br />
@ 5%<br />
Withdrawal<br />
from bank<br />
Net<br />
energy<br />
banked<br />
Cumulative<br />
balance in<br />
the bank<br />
@ 5% captive<br />
use<br />
for the<br />
month<br />
(units) (units) (units) (units) (units) (units) (units) (units) (units)<br />
April 110000 5500 104500 84500 20000 1000 0 19000 19000<br />
May 84000 4200 79800 90800 0 0 11000 0 8000<br />
June 100000 5000 95000 115000 0 0 8000 0 0<br />
8.2.4 A view has been expressed that the facility of<br />
banking permitted for the wind energy generator is not contemplated in the<br />
<strong>Electricity</strong> Act 2003. We wish to deliberate on this proposition. Section 86(1)(e)<br />
of the <strong>Electricity</strong> Act 2003 states that the State Commission shall promote<br />
generation of electricity from renewable sources of energy. Section 61(h) of the<br />
Act states that the Appropriate Commission shall specify the terms and<br />
conditions for the determination of tariff and in doing so shall be guided by the<br />
policy of promotion of generation of electricity from renewable sources of energy.<br />
Clause 5.2.20 of the National <strong>Electricity</strong> Policy stipulates that feasible potential of<br />
non conventional energy source mainly, small, hydro, wind and biomass would<br />
also need to be exploited fully to create additional power generation capacity.<br />
22
With a view to increase the over all share of non conventional energy source in<br />
the electricity mix, efforts will be made to encourage private sector participation<br />
through suitable promotional measures. Para 6.4(3) of the National Tariff Policy<br />
states that the Central Commission should lay down guidelines within three<br />
months for pricing non firm power, especially from non conventional sources, to<br />
be followed in cases where such procurement is not through competitive bidding.<br />
The National <strong>Electricity</strong> Policy and National Tariff Policy have the force of law in<br />
terms of Section 3 of the Act. Section 181 of the Act empowers the Commission<br />
to make regulations consistent with the Act and the rules to carry out provisions<br />
of the Act. Banking would squarely be covered by this provision.<br />
8.2.5. The above provisions of the Act are<br />
supplemented by the Commission. Clause 4 of the Power Procurement from<br />
new and renewable sources of energy Regulations 2008 of the Commission<br />
empowers the Commission to devise appropriate banking mechanism for<br />
generation of power from renewable sources of energy depending upon the<br />
inherent characteristics.<br />
8.2.6. Further, the guidelines of the Ministry of New<br />
and Renewable Energy, Government of India on promotion of energy from nonconventional<br />
sources recommend that the State <strong>Electricity</strong> Board provide for the<br />
electricity generated to be banked for a period of one year.<br />
8.3 Transmission and wheeling charges<br />
The transmission and wheeling charges were initially<br />
fixed by the TNEB at 2% in 1986 The charges were enhanced to 5% by the<br />
TNEB in September 2001. They remained at that level till 2006. The<br />
Commission adopted the same rate of 5% towards the transmission and<br />
wheeling charges including line losses in order No.3 <strong>dated</strong> 15-5-2006. The<br />
TNEB has now pleaded for stepping up the charges to 15% on the ground that<br />
transmission and distribution losses have gone up in the recent years. The<br />
23
transmission and distribution losses of the TNEB has remained static at 18%<br />
since 2003 and therefore, the Commission does not see merit in the plea of the<br />
TNEB to abruptly raise the charges to 15%. The Commission decides to retain<br />
the wheeling and transmission charges including line losses at 5% uniformly for<br />
captive use and third party sale of wind energy in the case of HT / EHT<br />
consumption. However, the charges in regard to captive use and third party sale<br />
in LT services are fixed at 7.5%..<br />
8.4 Cross subsidy surcharge<br />
At present order No.2 <strong>dated</strong> 15-5-2006 of the<br />
Commission prescribes the rates of cross subsidy surcharge. The rate varies<br />
from 97 paise to Rs.3.02 paise per unit depending on the category of the<br />
consumer and the voltage level. The State <strong>Electricity</strong> <strong>Regulatory</strong> Commissions<br />
of Maharashtra, Uttar Pradesh and Andhra Pradesh have done away with cross<br />
subsidy surcharge altogether. Gujarat State <strong>Electricity</strong> <strong>Regulatory</strong> Commission<br />
has proposed in their recent concept paper exemption of renewable energy<br />
sources from cross subsidy surcharge. The TNEB has chosen to relinquish<br />
temporarily, since November 2008, the cross subsidy surcharge leviable in terms<br />
of <strong>Order</strong> No.2 of the Commission. The TNEB has opposed preferential treatment<br />
for wind energy generators in the matter of cross subsidy surcharge. The<br />
Commission believes that it is time for <strong>Tamil</strong> <strong>Nadu</strong> to make a beginning in this<br />
respect and therefore, the Commission decides to levy 50% of the cross subsidy<br />
surcharge for wind energy generators.<br />
8.5 CDM benefits<br />
Undoubtedly, a promoter of wind energy is required to<br />
put in considerable efforts to secure the benefits of Clean Development<br />
Mechanism and therefore, there is merit in the views of certain stakeholders that<br />
the entire credit should accrue to the promoter as it obtains now. Some State<br />
Commissions have permitted the distribution licensee to share 25% of the CDM<br />
benefits. The Forum of Regulators has considered this issue and has<br />
24
ecommended that CDM benefits should be shared on gross basis starting from<br />
100% to developers in the first year and thereafter reducing by 10% every year<br />
till the sharing becomes equal (50:50) between the developer and the consumer<br />
in the sixth year. Thereafter, the sharing of CDM benefits will remain equal till<br />
such time the benefits accrue. The Commission accepts the formula<br />
recommended by the Forum of Regulators.<br />
8.6 Reactive power charges<br />
Due to inherent characteristics, wind energy<br />
generators are prone to draw reactive power from the grid, if adequate power<br />
factor correction is not applied. During the wind season, wind energy generators<br />
contribute about 20% of the grid demand and in such a situation grid stability will<br />
be jeopardized, if the wind energy generators are allowed to draw reactive power<br />
from the grid. Therefore, the Commission desides to retain the charges<br />
proposed in <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006. Thus, 25 paise per kVARh will be<br />
levied on wind energy generators, who draw reactive power upto 10% of the net<br />
active energy generated. Anyone drawing in excess of 10% of the net active<br />
energy generated will be liable to pay double the charge.<br />
8.7 Grid availability charges<br />
8.7.1. Start up power<br />
Provision of start up power by the distribution licensee<br />
and outage of wind energy generation are common and frequent in the wind<br />
energy sector. The drawal of energy by the generator during the start up from<br />
the distribution licensee shall be adjusted against the generated energy.<br />
8.7.2 Stand by power<br />
If adequate generation does not materialize or if<br />
drawal by the captive / third party consumer exceeds generation, energy charges<br />
and demand charges shall be regulated as follows:<br />
25
8.7.3 Energy charges<br />
When the generator is synchronized with the grid, the<br />
captive / third party consumer shall be liable to pay to the distribution licensee for<br />
the net energy consumed during the billing month at the applicable rate. The net<br />
energy consumption shall be slot wise. That is, peak generation shall be<br />
adjusted against peak consumption. Normal generation shall be adjusted<br />
against normal consumption. Off peak generation shall be adjusted against off<br />
peak consumption. Peak and normal generation may be adjusted against lower<br />
slot consumption.<br />
8.7.4 Demand charges<br />
8.7.4.1. In the case of a wind energy generator, there<br />
are two components of demand, namely, the demand supplied by the distribution<br />
licensee and the demand supplied by the wind energy generator. In regard to<br />
the former, the licensee is entitled to recover demand charges in terms of the<br />
Tariff <strong>Order</strong> of the Commission <strong>dated</strong> 15-3-2003. The demand supplied by the<br />
generator is estimated by the Commission in the following manner.<br />
8.7.4.2. Assuming a capacity utilization figure of<br />
27.15% and assuming that an average 65% of wind energy generated, (as per<br />
the data available with the Commission) is used for captive / third party<br />
consumption and assuming an average power factor of 0.9, the Commission<br />
arrives at a figure of 19.61% as the demand contributed by the generator. The<br />
energy supplied in each month by the wind energy generator shall be converted<br />
to an appropriate demand in KVA and the demand charges at 80.39% of the<br />
rates prescribed in the Tariff <strong>Order</strong> is payable by the wind energy generator in<br />
regard to that converted demand.<br />
8.7.4.3. The example below illustrates the case. The<br />
demand charges payable by the consumer on open access will be calculated as<br />
below:<br />
26
Total generated units consumed by the consumer on open access A<br />
divided by (30 x 24 x actual PF recorded during the billing month)<br />
Recorded demand (or) 90% of sanctioned demand, whichever is higher B<br />
The demand supplied by the Licensee (B – A)<br />
C<br />
The demand charges payable by consumer on open access =<br />
[A x (80.39%) of applicable demand charges + (C x applicable demand<br />
charges)]<br />
At current rate Demand Charges payable (Rs.)= [ (A x 0.8039 x 300) + (C x 300)]<br />
8.7.4.4. The TNEB has suggested that deemed<br />
demand concept may be abandoned since the demand charges are meant to<br />
recover the fixed charges incurred by the Board for creating the required assets.<br />
It needs to be clarified here that the cost of the asset created by the TNEB<br />
including the transmission and distribution lines are fully recovered in terms of<br />
the Tariff <strong>Order</strong> of the Commission. The shortfall in tariff revenue on account of<br />
the demand contributed by wind energy generators can be factored into the<br />
Annual Revenue Requirement of the TNEB and accounted for in the subsequent<br />
tariff revision as prescribed in the <strong>Electricity</strong> Act 2003 and the Tariff Regulations<br />
2005 of the Commission. On the other hand, the wind energy generators have<br />
represented that the distribution licensee should recover demand charges only<br />
for the net energy supplied by them. The Commission rejects this proposition<br />
because the licensee is obliged at all times to supply the committed demand to<br />
the consumer despite wide ranging fluctuations in the availability of wind energy.<br />
8.8 Adjustment of generated energy<br />
Section 9 (2) of the <strong>Electricity</strong> Act 2003 confers on the<br />
captive generator the right to open access for the purpose of carrying electricity<br />
from the captive plant to the destination of his use. Therefore, a wind energy<br />
generator shall be entitled to adjust the generated energy for captive<br />
consumption whether as a LT or a HT consumer. As regards sale to third<br />
parties, Clause 11 of the Intra State Open Access Regulations 2005 of the<br />
27
Commission, which prescribes a minimum limit of 1 MW, shall apply to wind<br />
generators also.<br />
Views have been expressed by some stakeholders<br />
against adjustment of captive generation for LT services. Acceptance of such a<br />
view would run counter to law and therefore, the Commission does not favour<br />
that view.<br />
8.9 Scheduling and system operation charges<br />
The scheduling and system operation charges for<br />
wind energy generators has been prescribed in <strong>Order</strong> No.2-5 <strong>dated</strong> 11-10-2008<br />
at Rs.300/- per day per 1.65 MW for each service connection. If the generation<br />
capacity of a service connection exceeds 1.65 MW, the same charge of Rs.300/-<br />
per day would apply. If the generation capacity of a service connection is less<br />
than 1.65 MW, the charges shall be proportionate. While arriving at the quantum<br />
of this charge, the Commission took into account the fact that the capacity<br />
utilization in wind energy generators is about 27% as against the average of 85%<br />
in conventional power plants and that large size wind mills are generally available<br />
in capacities of 1.65 MW.<br />
8.10 Application fees and agreement fees<br />
8.10.1. The Intra State Open Access Regulations<br />
2005 of the Commission were amended in 2008 to provide for concessional<br />
application fees and agreement fees for generators of non conventional and<br />
renewable sources of energy. The application fees under the Energy Wheeling<br />
Agreement was fixed at Rs.200 per MW subject to a maximum of Rs.5000 and<br />
the agreement fees under Energy Wheeling Agreement was fixed at Rs.2000 per<br />
MW subject to a maximum of Rs.50000 on the consideration that generators of<br />
renewable sources of energy have small capacities compared to generators of<br />
conventional energy. The agreement fees for Energy Purchase Agreement has<br />
been fixed at Rs.2000 per MW or part thereof. As regards the Energy Purchase<br />
28
Agreement, the TNERC – Fees and Fines Regulations 2004 prescribes Rs.2000<br />
per MW or part thereof as the fees for approval of Power Purchase Agreement<br />
by the Commission as against Rs.2500 per MW or part thereof leviable for<br />
conventional power plants. This fee shall be collected by the licensee and<br />
passed on to the Commission.<br />
8.10.2. There is some validity in the plea of the TNEB<br />
that frequent changes in the usage of the wind energy as well as the change of<br />
drawal point necessitate extra clerical work. Therefore, the Commission decides<br />
that every time a generator seeks such a change either through an amendment<br />
to an existing agreement or through a fresh agreement, an additional charge<br />
equivalent to the application fees and agreement fees shall be leviable by the<br />
licensee on the generator.<br />
8.11 Billing and payment<br />
8.11.1. When a wind generator sells power to the<br />
distribution licensee, the generator shall raise a bill every month for the net<br />
energy sold after deducting the charges for start up power and reactive power.<br />
The distribution licensee shall make payment to the generator within 30 days of<br />
receipt of the bill. Any delayed payment beyond 30 days is liable for interest at<br />
the rate of 1% per month.<br />
8.11.2. If a wind energy generator utilizes the power<br />
for captive use or if he sells it to a third party, the distribution licensee shall raise<br />
the bill at the end of the month for the net energy supplied. The licensee should<br />
record the generation and consumption simultaneously. While preparing the bill,<br />
peak hour generation shall be adjusted against peak hour consumption. Off<br />
peak generation shall be adjusted against off peak consumption. Normal<br />
generation shall be adjusted against normal consumption. Peak hour generation<br />
and normal hour generation can be adjusted against lower slot consumption.<br />
Excess consumption will be charged at the tariff applicable to the consumer.<br />
Transmission and wheeling charges, scheduling and system operation charges<br />
29
and cross subsidy surcharge, wherever applicable, shall be recovered from the<br />
bill. The net amount recoverable from the consumer shall be raised in the bill.<br />
8.12 Payment security and security deposit<br />
8.12.1. The National Tariff Policy calls for adequate<br />
and bankable security arrangements to the generating companies. <strong>Order</strong> No.3<br />
<strong>dated</strong> 15-5-2006 of the Commission stipulated a bankable security in favour of<br />
generators. This mechanism has been found impractical, as there are a large<br />
number of wind generators and the monolith distribution licensee is unable to<br />
offer security for such a large number. Therefore, the Commission believes that<br />
the penalty of 1% per month for delayed payment by the licensee would serve<br />
the ends of justice.<br />
8.12.2. As regards the security deposit of the<br />
consumer, the Commission decides to retain the present arrangements. i.e., two<br />
times the maximum net energy supplied by the distribution licensee in any month<br />
in the preceding financial year shall be taken as the basis for the payment of<br />
security deposit by the consumers.<br />
8.13 Power Factor incentive / disincentive<br />
As per Clause 7.17 of the Tariff <strong>Order</strong> <strong>dated</strong> 15-3-<br />
2003 of the Commission, power factor incentive / disincentive is applicable to a<br />
consumer as a percentage of current consumption charges. The average power<br />
factor recorded by the meter shall be the reference for calculation of the incentive<br />
/ disincentive. On the same analogy, captive consumers of wind energy shall be<br />
eligible for incentive or liable for disincentive based on the gross energy<br />
consumption and the applicable demand. This formula was adopted in <strong>Order</strong><br />
No.3 <strong>dated</strong> 15-5-2006 and the Commission retains the same formula.<br />
30
8.14 Metering<br />
8.14.1. The Commission decides that metering and<br />
communication shall be in accordance with the following:<br />
(1) Central <strong>Electricity</strong> Authority (Installation and<br />
Operation of Meters) Regulations 2006<br />
(2) <strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Distribution Code 2004<br />
(3) <strong>Tamil</strong> <strong>Nadu</strong> Grid Code 2004<br />
(4) <strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Intra State Open Access<br />
Regulations 2005<br />
8.14.2. Time of the day meter (ToD) / special energy<br />
meters shall be provided both at the generator end and consumer end, if open<br />
access is availed of. The consumers have been given the option to procure<br />
meters as specified in the Central <strong>Electricity</strong> Authority (Installation and Operation<br />
of meters) Regulations 2006.<br />
8.15 Evacuation of Wind Energy<br />
8.15.1. Section 39(2)(c) of the Act states that the<br />
State Transmission Utility shall ensure development of an efficient, co-ordinated<br />
and economical system of intra State transmission lines for smooth flow of<br />
electricity from a generating station to the load centres. Section 40 of the Act<br />
stipulates that it shall be the duty of the transmission licensee to build, maintain<br />
and operate an efficient, co-ordinated and economical system of intra State<br />
transmission and to provide non-discriminatory open access to its transmission<br />
system for use by any licensee or generating company on payment of the<br />
transmission charges or any consumer as and when such open access is<br />
provided by the State Commission under section 42(2) on payment of the<br />
transmission charges and a surcharge thereon, as may be specified by the State<br />
Commission. Section 42 of the Act states that it shall be the duty of the<br />
distribution licensee to develop and maintain an efficient, co-ordinated and<br />
economical distribution system in his area of supply.<br />
31
8.15.2. The Forum of Regulators has recommended<br />
that grid connectivity should be provided by the transmission licensee /<br />
distribution licensees for renewable energy sources in an optimum manner,<br />
through their capital expenditure plans to be submitted to the appropriate<br />
Commissions for their approval. Clause 3 of the Power Procurement from New<br />
and Renewable Sources of Energy Regulations,2008 states as follows:<br />
“Provided that, in the case of sale of entire power to the<br />
distribution licensee by any new and renewable source based generator, the cost<br />
of interfacing lines up to the interconnection point shall have to be borne only by<br />
the STU/ distribution licensee provided further that in case where the new and<br />
renewable source based generator referred to in the first proviso who has<br />
entered into an EPA with the distribution licensee referred to therein for the sale<br />
of entire power to the said distribution licensee decides to use such power<br />
agreed to be sold to the said distribution licensee, for his captive use or for sale<br />
of such power to a third person or to a distribution licensee other than the<br />
distribution licensee referred to above before the expiry of the period referred to<br />
in such EPA, then he shall be bound to reimburse the entire cost of interfacing<br />
lines to the distribution licensee with whom he has executed such EPA, before<br />
the wheeling of power to his captive use or sale to third person or distribution<br />
licensee other than the distribution licensee with whom the said EPA has been<br />
executed by him”.<br />
8.15.3. The TNEB submits that evacuation facility<br />
could be provided by them on priority basis, if they are permitted to collect<br />
infrastructural development charges. The Commission does not accept this plea<br />
because the <strong>Electricity</strong> Act 2003 makes it clear that it shall be the responsibility of<br />
the transmission utilities and the distribution licensee to create the appropriate<br />
infrastructure. Therefore, the Commission prescribes the following procedure for<br />
creation of evacuation facilities.<br />
32
(a) STU shall within 30 days of receipt of application from<br />
WEGs, intimate whether or not the long term access can<br />
be allowed without further system strengthening.<br />
(b) If further system strengthening is essential, the results of<br />
study conducted by the STU based on the request of<br />
WEGs shall be intimated within ninety days of such request<br />
of WEGs<br />
(c) Feasibility based on system studies shall be established<br />
within six months at the latest.<br />
(d) Clearances, approvals, certificate, if any, required by<br />
WEGs shall be issued within a month time.<br />
(e) The distribution licensee is not liable to pay compensation<br />
to the consumer on Open Access for deemed generation<br />
benefits in case the distribution licensee is unable to<br />
evacuate power due to failure of the Transmission and<br />
Distribution facility<br />
.<br />
8.15.4. The Commission decides that the cost of<br />
interfacing line upto the interconnection point shall have to be borne by the<br />
STU/Distribution Licensee in case of sale of entire power to Distribution Licensee<br />
by WEGs. For the captive use or sale of such power to third parties or to<br />
Distribution Licensee other than the Distribution Licensee of that area, the entire<br />
cost of inter facing line upto inter connection point shall have to be borne by the<br />
WEGs and the work will be executed by the Distribution Licensee under Deposit<br />
Contribution Work basis. The STU/ Distribution Licensee shall have to maintain<br />
the standards as per CEA norms and <strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Grid Code.<br />
8.16 Energy purchase agreement (EPA)<br />
The format of the Energy Purchase Agreement (EPA)<br />
shall be evolved by the Commission after discussion with wind energy generators<br />
33
and the distribution licensee within a month of this order. The agreement shall be<br />
valid for a minimum period of 20 years. The distribution licensee shall execute<br />
the Energy Purchase Agreement within a month of receipt of application from the<br />
generator. The parties to the agreement may be given the option of exiting in<br />
case of violation with three months notice to the other party.<br />
8.17 Energy wheeling agreement (EWA)<br />
The format of the Energy Wheeling Agreement (EWA)<br />
shall be evolved by the Commission within a month of the order after consultation<br />
with wind energy generators and the distribution licensee. The agreement shall<br />
be valid for a minimum period of 5 years. The parties to the agreement shall be<br />
given the option to exit for violation of the agreement after serving a notice of<br />
three months on the other party. The plea of the TNEB for discontinuance of<br />
wheeling in case of default is taken care of by the relevant provisions in the Intra<br />
State Open Access Regulations 2005 of the Commission. The TNEB objects to<br />
the frequent change in the usage of wind energy and the change of drawal point.<br />
The Commission has dealt with this objection in para 8.10.2.<br />
8.18 Renewable Energy Purchase Obligations (RPO)<br />
8.18.1. Section 86(1)(e) enjoins upon the Commission<br />
to specify, for purchase of electricity from renewable sources of energy, a<br />
percentage of the total consumption of electricity in the area of a distribution<br />
licensee. The above statutory provisions is supplemented by Clause 6.4 of the<br />
National Tariff Policy which states that the Appropriate Commission shall fix a<br />
minimum percentage for purchase of energy from renewable energy sources,<br />
taking into account availability of such resources in the region and its impact on<br />
retail tariff. The Forum of Regulators (FOR) has recommended that renewable<br />
purchase obligation should be computed with reference to the energy input into<br />
the system and not the energy consumed.<br />
34
8.18.2. As per the statistics furnished by the TNEB,<br />
the energy injected into the grid by the TNEB was 65085 MU for 2007-08. The<br />
Chief Electrical Inspector, Government of <strong>Tamil</strong> <strong>Nadu</strong> has reported that 2,570<br />
MU were generated by standby generator sets during 2007-08. As it is not<br />
possible to estimate the energy generated by unorganized standby generators, it<br />
is sufficient to estimate the energy input on the basis of the above two figures, at<br />
67,655 MU.<br />
8.18.3. The energy injected by renewable sources of<br />
energy into the TNEB grid during 2007-08 was 7,615 MU. The percentage of<br />
energy injected by the renewable energy sources works out to 11.26% of the<br />
total energy consumption in the area of the distribution licensee (7615 ÷ 67655).<br />
Excluding the energy generated by the standby generators, the percentage<br />
works out to 11.70 as against 11.26.<br />
8.18.4. The Commission decides to fix the Renewable<br />
Energy Purchase Obligation at minimum of 13% for 2009-10 and minimum of<br />
14% for 2010-11.<br />
8.19. Control period<br />
The <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006 of the Commission<br />
lays down a control period of three years. As the determinants of tariff<br />
underwent radical changes during the control period, some of the stakeholders<br />
represented for curtailing the control period. In pursuance of that effort the<br />
Commission consulted experts on 16-7-2008 and delivered an <strong>Order</strong> on 19-9-<br />
2008 in M.P. Nos. 9, 14 and 23 of 2008 scaling down the control period to two<br />
years. Clause 6 of the Power Procurement from New and Renewable Sources of<br />
Energy Regulations 2008 of the Commission promulgated on 8-2-2008 specifies<br />
that the control period may be ordinarily two years. Taking into account the views<br />
of the stakeholders, the Commission decides that the control period of this <strong>Order</strong><br />
shall extend upto 31-3-2011.<br />
35
9. Wind energy tariff<br />
9.1. Wind energy tariff is computed with reference to<br />
the determinants listed in para (7) of this order. The tariff works out to Rs.3.24<br />
per unit for the period upto 31-3-2009 and Rs.3.39 per unit after 1-4-2009. The<br />
wind mills commissioned between 19-9-2008 and 19-3-2009 shall be eligible for<br />
a tariff of Rs.2.90 per unit. These wind mills shall be eligible for Rs.3.24 per unit<br />
from 20-3-2009 to 31-3-2009 and Rs.3.39 per unit from 1-4-2009. The wind mills<br />
commissioned on or after 20-3-2009 shall be eligible for tariff of Rs.3.24 per unit<br />
upto 31-3-2009 and the tariff of Rs.3.39 per unit from 1-4-2009.<br />
9.2. The wind mills commissioned prior to 15-5-2006<br />
shall be eligible for a tariff of Rs.2.75 per unit. The wind mills commissioned<br />
between 15-5-2006 and 18-9-2008 shall be eligible for a tariff of Rs.2.90 per unit.<br />
10. Acknowledgement<br />
The Commission acknowledges with gratitude the<br />
contribution of the officers and staff of the Commission, the valuable guidance<br />
provided by experts, the active participation and advice of the Members of the<br />
State Advisory Committee and the pains taken by the Members of the public in<br />
offering their suggestions. The Commission particularly is indebted to the<br />
valuable input of the <strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board, <strong>Tamil</strong> <strong>Nadu</strong> Energy<br />
Development Agency, Indian Renewable Energy Development Agency and the<br />
Ministry of New and Renewable Energy Sources, Government of India.<br />
Sd……………… Sd…………………. Sd………….<br />
(R. Rajupandi) (B. Jeyaraman) (S. Kabilan)<br />
Member Member Chairman<br />
(By order of the Commission)<br />
R. Balasubramanian<br />
Secretary<br />
36
Annexure – I<br />
CONSULTATIVE PAPER ON POWER PROCUREMENT BY DISTRIBUTION<br />
LICENSEES FROM WIND ENERGY GENERATORS AND ALLIED OPEN<br />
ACCESS ISSUES<br />
37
Annexure – I<br />
CONSULTATIVE PAPER ON “POWER PROCUREMENT BY DISTRIBUTION<br />
LICENSEES FROM WIND ENERGY GENERATORS AND ALLIED OPEN<br />
ACCESS ISSUES”<br />
1.0 NEED FOR THE CONSULTATIVE PAPER<br />
1.1 The importance of Renewable Energy Sources<br />
Global concern over pollution and several related issues caused by the increase<br />
in green house gas emission and consequent changes in climate have resulted in a<br />
paradigm shift in the approach towards development of the energy sector in many<br />
countries. The need for adoption of clean technology, improving end use efficiency and<br />
diversifying energy bases etc., have all been seriously considered by the Government of<br />
India since the Sixth Five Year Plan, and the country is poised for a considerable<br />
increase in the use of renewable energy sources in its transition to a sustainable energy<br />
base. Renewable energy sources such as wind, solar, hydro and bio mass not only<br />
augment energy generation, but also contribute to improvement in the quality of the<br />
environment, drought control, energy conservation, employment generation, upgrading<br />
of health and hygiene, social welfare, security of drinking water, increased agricultural<br />
yield and production of bio-fertilizers. The pace of development has been accelerated by<br />
the Government through promotional policies and fiscal and tax incentives.<br />
1.2 Commission’s Regulation on New and Renewable Energy Source of Energy<br />
Section 61 of the <strong>Electricity</strong> Act 2003 (Central Act 36 of 2003) stipulates that the<br />
State <strong>Electricity</strong> <strong>Regulatory</strong> Commission shall specify the terms and conditions for the<br />
determination of tariff. In line with the above stipulation, the Commission issued and<br />
notified the “Power Procurement from New and Renewable Sources of Energy<br />
Regulations 2008” on 8.02.2008. In the above said Regulation it has been specified that<br />
the tariff determined by the Commission in the tariff order shall be applicable for the<br />
power purchase agreement period of twenty years and the control period may be two<br />
years.<br />
38
1.3 Commission’s order on Non Conventional Energy Sources (NCES) based<br />
generation and allied Issues<br />
The Commission notified <strong>Order</strong> No. 3 on “Power purchase and allied issues<br />
in respect of Non-Conventional Energy Sources based Generating Plants and Non-<br />
Conventional Energy Sources based Co-Generation Plants” on 15-5-2006. The said<br />
order stipulates tariff rates for power procurement by the distribution licensee from Wind<br />
Energy Generators (WEGs), biomass based generators and bagasse based cogenerators.<br />
In the said order the Commission decided to adopt a control period of three<br />
years. The next tariff revision is due from 15.6.2009.<br />
1.4 Commission’s order on relaxation of control period<br />
The Commission in its order <strong>dated</strong> 19-09-2008, against the petitions M.P. Nos. 9,<br />
14 & 23 of 2008 filed by Indian Wind Energy Association (InWEA) and others, has<br />
decided that “the control period of three years as specified in <strong>Order</strong> No. 3 <strong>dated</strong><br />
15.05.2006 is waived from the date of issue of this order”.<br />
1.5 Representation of WEGs, Wind Energy Developers and Wind Turbine<br />
Manufacturers<br />
For the past one year, the wind turbine manufacturers, wind energy<br />
developers and wind energy generators have repeatedly represented that input costs<br />
such as capital cost, interest rates, maintenance cost, etc. have considerably increased<br />
in the last two years. They have been repeatedly requesting the Commission to revise<br />
the tariff before the control period of three years, taking into account the above<br />
escalation in input cost. In the last few years the capacity addition of wind generation in<br />
<strong>Tamil</strong> <strong>Nadu</strong> shows a declining trend whereas States like Gujarat have registered an<br />
increasing trend. Though there are many reasons which would have contributed for the<br />
decline in the capacity addition, it has been widely reported that one of the reasons for<br />
the decline in wind energy addition is unattractive tariff in <strong>Tamil</strong> <strong>Nadu</strong>.<br />
1.6 Commission’s initiative on tariff revision for NCES based generation<br />
In response to the above representation, the Commission conducted a round<br />
table conference on 16.7.2008 to obtain the views of the wind energy policy makers,<br />
wind energy experts, wind turbine manufacturers, wind energy developers, wind energy<br />
39
generators and other stake holders. Officials from Ministry of New and Renewable<br />
Energy Source (MNRE), Indian Renewable Energy Development Agency Limited<br />
(IREDA), <strong>Tamil</strong> <strong>Nadu</strong> Energy Development Agency (TEDA) and <strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong><br />
Board (TNEB) participated in the conference.<br />
Based on the views of the participants, the Commission has decided to initiate<br />
the process of tariff revision for power procurement from WEGs by distribution licensees<br />
in the State.<br />
2.0 EMPHATIC PROVISIONS OF THE ELECTRICITY ACT 2003, NATIONAL<br />
ELECTRICITY POLICY AND NATIONAL TARIFF POLICY ON NCES.<br />
Preamble of the <strong>Electricity</strong> Act 2003 reads as follows:<br />
“An Act to consolidate the laws relating to generation, transmission, distribution,<br />
trading and use of electricity and generally for taking measures conducive to<br />
development of electricity industry, promoting competition therein, protecting<br />
interest of consumers and supply of electricity to all areas, rationalization of<br />
electricity tariff, ensuring transparent policies regarding subsidies, promotion of<br />
efficient and environmentally benign policies constitution of Central <strong>Electricity</strong><br />
Authority, <strong>Regulatory</strong> Commissions and establishment of Appellate Tribunal<br />
and for matters connected therewith or incidental thereto.”<br />
Section 86 (1) (e) of the <strong>Electricity</strong> Act 2003 states that the State Commission shall<br />
promote congenration and generation of electricity from renewable sources of energy<br />
by providing suitable measures for connectivity with the grid and sale of electricity to<br />
any person, and also specify, for purchase of electricity from such sources, a<br />
percentage of the total consumption of electricity in the area of a distribution licensee.<br />
Section 61 (h) of the <strong>Electricity</strong> Act 2003 states that the Appropriate Commission<br />
shall, subject to the provisions of this Act, specify the terms and conditions for<br />
determination of tariff and in doing so shall be guided by the following namely, (h)<br />
the promotion of cogeneration and generation of electricity from renewable<br />
sources of energy, (i) the National <strong>Electricity</strong> Policy and Tariff Policy.<br />
Related provisions of the National <strong>Electricity</strong> Policy are quoted below.<br />
“5.2.20 Feasible potential of non-conventional energy resources, mainly small<br />
hydro, wind and bio-mass would also need to be exploited fully to create<br />
additional power generation capacity. With a view to increase the overall share of<br />
non-conventional energy sources in the electricity mix, efforts will be made to<br />
encourage private sector participation through suitable promotional measures.”<br />
40
“5.12.2 The <strong>Electricity</strong> Act 2003 provides that co-generation and generation of<br />
electricity from non-conventional sources would be promoted by the SERCs by providing<br />
suitable measures for connectivity with grid and sale of electricity to any person and also<br />
by specifying, for purchase of electricity from such sources, a percentage of the total<br />
consumption of electricity in the area of a distribution licensee. Such percentage for<br />
purchase of power from non-conventional sources should be made applicable for the<br />
tariffs to be determined by the SERCs at the earliest. Progressively the share of<br />
electricity from non-conventional sources would need to be increased as prescribed by<br />
State <strong>Electricity</strong> <strong>Regulatory</strong> Commissions. Such purchase by distribution companies shall<br />
be through competitive bidding process. Considering the fact that it will take some time<br />
before non-conventional technologies compete, in terms of cost, with conventional<br />
sources, the Commission may determine an appropriate differential in prices to promote<br />
these technologies.”<br />
Para 6.4 of the National Tariff Policy states as below:<br />
“(1) Pursuant to provisions of section 86(1)(e) of the Act, the Appropriate<br />
Commission shall fix a minimum percentage for purchase of energy from such<br />
sources taking into account availability of such resources in the region and its<br />
impact on retail tariffs. Such percentage for purchase of energy should be made<br />
applicable for the tariffs to be determined by the SERCs latest by April 1, 2006. It<br />
will take some time before non-conventional technologies can compete with<br />
conventional sources in terms of cost of electricity. Therefore, procurement by<br />
distribution companies shall be done at preferential tariffs determined by the<br />
Appropriate Commission.<br />
(2) Such procurement by Distribution Licensees for future requirements shall be<br />
done, as far as possible, through competitive bidding process under Section 63<br />
of the Act within suppliers offering energy from same type of non-conventional<br />
sources. In the long-term, these technologies would need to compete with other<br />
sources in terms of full costs.<br />
(3) The Central Commission should lay down guidelines within three months for<br />
pricing non-firm power, especially from non–conventional sources, to be followed<br />
in cases where such procurement is not through competitive bidding.”<br />
A reading of the National Tariff Policy, National <strong>Electricity</strong> Policy and the<br />
<strong>Electricity</strong> Act 2003 establish the overwhelming emphasis on environmental friendly<br />
renewable sources of energy such as wind, hydel, solar and biomass. <strong>Tamil</strong> <strong>Nadu</strong> has<br />
been a pioneer in harnessing wind power, which has enabled the State to capture 4100<br />
MW, which accounts for 43 % of the capacity in the entire country as on date. But, this<br />
trend witnessed reversal during 2007-08 owing to the perceived adverse factors such as<br />
constraints on evacuation of wind energy and frequent load shedding of captive users of<br />
wind energy.<br />
41
We need to bear in mind that wind energy is cheap and environment friendly. It<br />
came to the rescue of the State during the difficult months of 2008. The Commission<br />
has all along adopted progressive and forward-looking policies in regard to wind energy.<br />
It would be a tragedy to let the initiative slip out of <strong>Tamil</strong> <strong>Nadu</strong>. Gujarat, Maharashtra and<br />
Karnataka are fast becoming a destination of wind energy investments. <strong>Tamil</strong> <strong>Nadu</strong><br />
should strive its best to retain the leadership in this field.<br />
Yet another factor, which is to be borne in mind, is that while thermal generation<br />
plants take three to four years to mature, wind energy generators require just three to six<br />
months to install their capacity. Considering the difficult times ahead for the next three<br />
years, it is essential that the State adds capacity quickly, even discounting the fact that<br />
wind energy is available only for six months in a year.<br />
3.0 WIND POWER SCENARIO<br />
Total installed capacity of power generation in the country is 1, 44,131 MW as on<br />
31.3.2008. The contribution of NCES power to the country’s installed capacity is around<br />
12,195 MW (Source: Central <strong>Electricity</strong> Authority) out of which the contribution of wind<br />
power is around 8739 MW as on 31-3-2008. The NCES power represents 8.46% and<br />
wind power 6.06% of the total installed capacity. The installed capacity of wind power in<br />
different States as on 31-3-2008 are furnished below:<br />
Name of State<br />
Potential<br />
in MW<br />
Installed<br />
Capacity in<br />
MW<br />
Percentage<br />
to the Total<br />
Andhra Pradesh 8275 122.50 1.40<br />
Gujarat 9675 1252.50 14.33<br />
Karnataka 6620 1011.00 11.57<br />
Kerala 875 10.50 0.12<br />
Madhya Pradesh 5500 187.70 2.15<br />
Maharashtra 3650 1756.00 20.09<br />
Rajasthan 5400 539.00 6.17<br />
<strong>Tamil</strong> <strong>Nadu</strong> 5500 3856.77 44.13<br />
West Bengal 450 1.10 0.01<br />
Others 1.60 0.02<br />
TOTAL 45195 8738.67 100.00<br />
42
3.1 Wind Power Scenario - <strong>Tamil</strong> <strong>Nadu</strong><br />
The harnessing of wind energy is highest in <strong>Tamil</strong> <strong>Nadu</strong> with an installed capacity<br />
of 3857 MW, contributing 44.14% of the country’s total installed capacity of around 8739<br />
MW as on 31.3.2008. The following locations are endowed with favourable wind flow:-<br />
Name of the<br />
Areas<br />
Passes/Districts<br />
Palghat<br />
Coimbatore, Erode and Dindigul<br />
Shencottah<br />
Tirunelveli and Tuticorin<br />
Aralvoimozhi<br />
Kanyakumari, Radhapuram and Muppandal<br />
Theni District<br />
Theni, Cumbum and Andipatty<br />
Sea coast<br />
Uvari, Tuticorin, Rameswaram, Poompuhar and Ennore<br />
The year wise capacity addition in <strong>Tamil</strong> <strong>Nadu</strong> over the past 10 years is furnished below:<br />
<strong>Tamil</strong> <strong>Nadu</strong> - Year wise capacity addition<br />
Period<br />
Wind capacity<br />
addition in MW<br />
Up to 1992 22.31<br />
1992-93 11.07<br />
1993-94 50.47<br />
1994-95 190.87<br />
1995-96 281.68<br />
1996-97 119.77<br />
1997-98 31.14<br />
1998-99 17.77<br />
1999-00 45.68<br />
2000-01 41.90<br />
2001-02 44.90<br />
2002-03 132.80<br />
2003-04 371.30<br />
2004-05 675.40<br />
2005-06 857.60<br />
2006-07 565.00<br />
2007-08 397.11<br />
Total as on 31.3.2008 3856.77<br />
The steady increase in capacity addition of wind power generation in <strong>Tamil</strong> <strong>Nadu</strong><br />
is mainly attributed to the favourable meteorological and topographical conditions and<br />
the policies of the State that encourage NCES.<br />
43
3.2 Generation – Demand gap in <strong>Tamil</strong> <strong>Nadu</strong><br />
The generating capacity connected to TNEB’s grid including the allocation from<br />
Central Generating Station is 10122.55 MW as on 31.03.2008 comprising 2970 MW<br />
from TNEB’s four thermal stations, 424 MW from four gas turbine stations, 2187 MW<br />
from 33 hydro stations, 17.55 MW from TNEB’s wind farm, 1180 MW from private sector<br />
power projects, 214 MW as contribution to <strong>Tamil</strong> <strong>Nadu</strong> grid by sale of electricity from<br />
captive generating plants, 2825 MW as <strong>Tamil</strong> <strong>Nadu</strong>’s share from central generating<br />
stations and 305 MW as external assistance.<br />
Generating capacity from privately owned wind farms is 3839 MW. The installed<br />
capacity of cogeneration in sugar mills is 451.6 MW and biomass power project is<br />
104.85 MW.<br />
The average power availability during 2008-09 is around 8000 MW while the<br />
peak demand is around 9500 MW which leaves a deficit of around 1500 MW. Since the<br />
infirm wind generation contributes about 15% to 20% of the peak demand during wind<br />
season and TNEB has no standby capacity to take care of this infirm power fully, in case<br />
of unexpected meteorological changes, the deficit goes up to 2000 MW. This deficit is<br />
likely to increase in the next few years since the capacity addition is expected to be less<br />
than the projected increase in demand. Therefore, any addition of wind power<br />
generation will help the State to a great extent to tide over the shortage of power<br />
prevailing in the State.<br />
4.0 APPLICABILITY OF PROPOSED ORDER<br />
In line with the Commission’s order No: 3 <strong>dated</strong> 15-05-2006, the proposed order<br />
shall come into force from the date of its issue. The tariff fixed in the proposed order<br />
shall be applicable to all the WEGs commissioned on or after the date of this order. It<br />
should be noted that the existing contracts and agreements between WEGs and the<br />
distribution licensees signed prior to this order would continue to remain in force.<br />
However, the WEGs and the distribution licensees shall have the option to mutually renegotiate<br />
the existing agreements / contracts in line with this order before the expiry of<br />
the contracts / agreements. Any renewal of the said contracts / agreements, new<br />
contracts / agreements shall be in conformity with this order. The tariff would be with<br />
reference to the date of commission and the rate in force on that day.<br />
44
5.0 Definitions.<br />
(a) “Firm Power” means injecting of atleast 700 units into the grid by the generator per<br />
hour per scheduled MW. [This calculation is based on a normative load factor of 70%<br />
(i.e. 1000 kWh x 70% Load Factor = 700 units per hour)].<br />
(b) “Infirm Power” means the energy supplied that is not firm power, which is<br />
interruptible on a very short notice.<br />
6.0 TARIFF DETERMINATION PROCESS<br />
With regard to tariff determination process, the relevant portion of Regulation 4 of<br />
the Power Procurement from New and Renewable Sources of Energy Regulation, 2008<br />
are reproduced below:<br />
The Commission shall follow the process mentioned below for the determination of tariff<br />
for the power from new and renewable sources based generators, namely;-<br />
e) initiating the process of fixing the tariff either suo motu or on an application filed<br />
by the distribution licensee or by the generator.<br />
f) inviting public response on the suo motu proceedings or on the application filed<br />
by the distribution licensee or by the generator.<br />
g) conducting public hearing on the above.<br />
h) issuing general / specific tariff order for purchase of power from new and<br />
renewable sources based generators.<br />
The Commission in its order <strong>dated</strong> 19-09-2008, against the petitions M.P. Nos. 9, 14<br />
& 23 of 2008 filed by Indian Wind Energy Association (InWEA) and others, have ordered<br />
that “the prayer for revising the tariff for the NCES generators would be considered by<br />
the Commission separately”. In accordance with the above order, the Commission has<br />
prepared this consultative paper to elicit the views and suggestions of the stake holders.<br />
7.0 TARIFF / PRICING METHODOLOGY<br />
The relevant portion of Tariff / Pricing Methodology as specified in Regulation 4<br />
of the Commission’s above said Regulation is reproduced below.<br />
(2) While deciding the tariff for power purchase by distribution licensee from new and<br />
renewable sources based generators, the Commission shall, as far as possible, be guided<br />
by the principles and methodologies specified by:<br />
(a) Central <strong>Electricity</strong> <strong>Regulatory</strong> Commission<br />
(b) National <strong>Electricity</strong> Policy<br />
(c) Tariff Policy issued by the Government of India<br />
(d) Rural Electrification Policy<br />
(e) Forum of Regulators (FOR)<br />
(f) Central and State Governments<br />
45
(3) The Commission shall, by a general or specific order, determine the tariff for the<br />
purchase of power from each kind of new and renewable sources based generators by the<br />
distribution licensee………..<br />
Provided where the tariff has been determined by following transparent process of<br />
bidding in accordance with the guidelines issued by the Central Government, as provided<br />
under section 63 of the Act, the Commission shall adopt such tariff.<br />
(4) While determining the tariff, the Commission may, to the extent possible consider to<br />
permit an allowance / disincentive based on technology, fuel, market risk, environmental<br />
benefits and social impact etc., of each type of new and renewable source.<br />
(5) While determining the tariff, the Commission shall adopt appropriate financial and<br />
operational parameters.<br />
(6) While determining the tariff the Commission may adopt cost plus single part average<br />
tariff which can be reviewed later.<br />
7.1 Preferential tariff or by bidding process<br />
At this juncture it is relevant to discuss the following stipulations of National Tariff<br />
Policy which are reproduced below:<br />
Section 6.4(1): Pursuant to provisions of section 86(1)(e) of the Act, the appropriate<br />
Commission shall fix a minimum percentage for purchase of energy from such sources<br />
taking into account availability of such resources in the region and its impact on retail<br />
tariffs. Such percentage for purchase of energy should be made applicable for the tariffs<br />
to be determined by the SERCs latest by April 1, 2006. It will take some time before nonconventional<br />
technologies can compete with conventional sources in terms of cost of<br />
electricity. Therefore, procurement by distribution companies shall be done at<br />
preferential tariffs determined by the appropriate Commission.<br />
Section 6.4(2): Such procurement by distribution licensees for future requirements shall<br />
be done, as far as possible, through competitive bidding process under Section 63 of the<br />
Act within suppliers offering energy from same type of non-conventional sources. In the<br />
long-term, these technologies would need to compete with other sources in terms of full<br />
costs.<br />
It is a fact that wind energy is becoming a major alternate source of green power.<br />
However, the capital cost and the cost of generation are still higher than coal based<br />
generation. It is felt that it will take some more time before wind energy technology can<br />
compete with conventional sources in terms of cost effectiveness. Therefore, the<br />
Commission propose that wind energy procurement by distribution licensees shall be<br />
done at preferential tariffs as determined by the Commission as per 6(4) (1) of the tariff<br />
policy.<br />
46
However, the Rajasthan <strong>Electricity</strong> <strong>Regulatory</strong> Commission has specified vide its<br />
order <strong>dated</strong> 9-3-2007 that, after 31-3-2009, the wind power tariff could be adopted based<br />
on competitive bidding. <strong>Tamil</strong> <strong>Nadu</strong> has seven times more installed capacity of WEGs<br />
than Rajasthan.<br />
Suggestions are invited on the above issue.<br />
7.2 Market Determined Pricing<br />
In a free market, where there is perfect competition, market determines the price.<br />
But there is a shortage of power in the State and this is likely to continue for a few more<br />
years. There is good reason to believe that market driven pricing mechanism may be<br />
difficult to apply in the case of wind power. Under market determined prices, the buyer of<br />
power would opt for merit-order dispatch and purchase power from the cheapest source.<br />
Wind power is infirm in nature and it cannot be precisely dispatched with present<br />
technology. Wind power is mainly dependent on wind season and flow pattern. These<br />
factors make market pricing of power purchase from WEGs difficult.<br />
7.3 Project Specific or Generalized Tariff<br />
A Generalized tariff mechanism would provide incentive to the investors for use<br />
of most efficient equipment to maximize returns and for selecting the most efficient site<br />
while a project-specific tariff would provide each investor, irrespective of the machine<br />
type and the site selected, the stipulated return on equity which, in effect, would shield<br />
the investor from the uncertainties involved in CUF due to machine type and the site<br />
location. In <strong>Tamil</strong> <strong>Nadu</strong>, so far, no wind farm developer has moved the Commission for<br />
project specific generation tariff. Capacity of most of the generators is limited to a few<br />
MWs. It is not advisable to adopt project specific tariff in such a context. It is suggested<br />
that the Commission may issue a generalized tariff order for WEG. It is proposed that<br />
whenever there is a petition from large wind farms the Commission may consider project<br />
specific tariff order.<br />
7.4.0 Cost-Plus Tariff Determination<br />
Cost-plus tariff determination is a more practical method. It can be easily<br />
designed to provide adequate returns to the investor and a surety of returns will lead to<br />
larger investment in wind power generation. It is also in line with Regulation 4(6) of<br />
“Power Procurement from New and Renewable Sources of Energy Regulations 2008”.<br />
47
7.4.1 Single Part vs. Two Part Tariff<br />
Two part tariff is applied in order to recover fixed and variable costs through the<br />
fixed and variable components of tariff. Since the question of fuel does not arise for<br />
WEGs, all the costs of wind electric generators are considered to be fixed. There may be<br />
some variation in CUF, O&M costs, Insurance cost etc. This will be appropriately<br />
addressed by adopting suitable discount/escalation factors. Therefore, the “single part<br />
tariff” is considered more suitable for wind power than a two part tariff. It is also in line<br />
with Regulation 4(6) of “Power Procurement from New and Renewable Sources of<br />
Energy Regulations 2008”.<br />
7.4.2 Cost plus single part average tariff<br />
In the Commission’s order No. 3 <strong>dated</strong> 15-5-2006, the Commission adopted the<br />
“cost plus single part average tariff”. This tariff order was challenged by Wind Power<br />
Producers Association before the Appellate Tribunal for <strong>Electricity</strong> (ATE). The ATE in its<br />
order <strong>dated</strong> 18-12-2007 against the appeal No 205/2006 and 235/2006 have directed<br />
the Commission that “the tariff for the wind power producers be re-determined<br />
within the next two months by taking into consideration the time value of money”.<br />
The order of the ATE was challenged by the Commission and the TNEB before the<br />
Hon’ble Supreme Court and the Hon’ble Supreme Court in its order <strong>dated</strong>:03-03-2008<br />
(against appeal Nos: 1361-1362 0f 2008) have stayed the order of the ATE. The<br />
Commission’s contention is that in lieu of the time value of money, care has been taken<br />
by providing de-rating of CUF @ 1% every year after 10 years, grouping of existing and<br />
proposed WEGs in two categories and escalation of O&M charges @ 5% every year<br />
after five years. Regulation 4(2) (6) of the Commission’s “Power Procurement from New<br />
and Renewable Sources of Energy Regulation 2008” proposes “cost plus single part<br />
average tariff”. It is proposed to adopt the same in the ensuing tariff order.<br />
Other alternative is to arrive at a base tariff taking into account the existing financial<br />
parameters and escalate it every year as done by the Maharashtra <strong>Electricity</strong> <strong>Regulatory</strong><br />
Commission. This may also resolve the control period issue.<br />
Suggestions/comments are invited from the stake holders in this regard.<br />
8.0 TARIFF COMPONENTS<br />
The above said Regulation of the Commission specifies that while determining the<br />
tariff, the Commission shall adopt appropriate financial and operational parameters. The<br />
48
tariff, if determined in a cost-plus scenario, would depend significantly on the following<br />
operating and financing parameters. The key drivers of cost are:<br />
• Capacity Utilization Factor<br />
• Capital investment<br />
• Life of plant and salvage value<br />
• Depreciation rate applicable<br />
• Operation and maintenance expenses<br />
• Insurance expenditure<br />
• Debt-equity ratio<br />
• Interest costs on debt (cost of loan / debt)<br />
• Term of Loan<br />
• Return on equity<br />
• Control Period<br />
• CDM Benefits<br />
• Power Evacuation facilities<br />
Each of the above parameters is discussed below in detail.<br />
8.1 Capacity Utilization Factor (CUF)<br />
The CUF depends on several factors such as wind velocity, air density, power<br />
law Index, capacity and performance of the machines, age of the machines, height of the<br />
hub, and length of the blade. The Commission has the location-wise, machines-wise<br />
CUF data for the new machines commissioned up to 31-03-2006, collected for the last<br />
tariff order. Location-wise, machines-wise CUF data has been collected from TNEB for<br />
the new machines commissioned after 15-5-2006. Data on the potential development<br />
areas and capacity were also obtained from TNEB. The average CUF for the proposed<br />
WEGs expected to be installed in the potential area during the control period works out<br />
to be 27.15 and the same is proposed to be considered for tariff calculation.<br />
8.1.1 De-rating factor for WEGs<br />
With regard to fixing of de-rating factor for wind machines, the following parameters<br />
have to be considered.<br />
1. Reduction in wind availability,<br />
2. Ageing of wind machines.<br />
49
Commission in <strong>Order</strong> No.3 <strong>dated</strong> 15-05-2006 fixed the de-rating factor of 1% every<br />
year after 10 years of operation. The Commission proposes to adopt the same for the<br />
proposed tariff revision.<br />
The Indian Wind Power Association (IWPA) has represented to the Commission that<br />
most of the machines commissioned before 15.05.2006 are of smaller capacity having a<br />
low hub height and the average PLF of these machines has come down to 17% in 2007-<br />
08 from 21% in 1999-2000.<br />
In this connection, the Commission has decided to collect exhaustive data from the Wind<br />
Mills Association as well as TNEB and then take a view.<br />
8.2 Capital Investment<br />
In <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006, for the Group I WEGs commissioned before 15-<br />
5-2006, a capital cost of Rs 4.50 Crores per MW was adopted by the Commission. For<br />
the Group II Wind power projects commissioned after 15-5-2006, a capital cost of Rs<br />
5.0 Crores per MW was adopted. In the round table meet, experts and developers have<br />
suggested capital cost in the range from Rs. 5.5 Crores to Rs 6.2 Crores per MW for<br />
which there is no authenticity or evidence of any bid evaluated documents. The capital<br />
costs assumed by the other Commissions against the year of their orders are tabulated<br />
below.<br />
Name of Date of the order Capital cost in Rs<br />
the ERC<br />
Crores per MW<br />
GERC 11-8-2006 4.65 (including<br />
evacuation)<br />
KSERC 24-6-2006 and upheld in 27-2-2008 4.4<br />
MPERC 21-11-2007 4.60<br />
RERC Original order on 29-9-2006 and confirmed vide 4.22<br />
order 09.03.2007<br />
HERC 15-5-2007 4.3<br />
KERC 18-1-2005 4.25<br />
MERC 24-11-2003 upheld in 16-8-2006 and 6-5-2008 4<br />
Among the above orders, the latest order was issued<br />
on 21-11-2007 by the MPERC. They have considered a capital cost of Rs.4.60 Crores.<br />
The previous order was issued by the HERC, which has considered a capital cost of<br />
Rs.4.3 Crores. The Centre for Wind Energy Technology (C-WET), Government of India,<br />
in their website, has reported that capital cost ranges between Rs.4.5 Crores to Rs.5.5<br />
Crores per MW, depending on the site and the type of wind electric generator selected<br />
for installation. The website of TEDA quotes a capital cost of Rs.5 Crores to Rs.6<br />
50
Crores per MW. The website of Indian Wind Turbine Manufacturers Association<br />
suggests a capital cost of Rs.6.5 Crores per MW. Mr.K.P.Sukumaran, Advisor, Ministry<br />
of New and Renewable Energy Sources, Government of India, recommended a capital<br />
cost in the region of Rs.5.5 – 5.75 Crores per MW at the round table conference held on<br />
16-07-2008. The Chairman and Managing Director of Indian Renewable Energy<br />
Development Agency, New Delhi in his letter <strong>dated</strong> 2-12-2008 and the Ministry of New<br />
and Renewable Energy, Government of India in their letter <strong>dated</strong> 8-12-2008 have stated<br />
that the average capital cost is Rs.5.60 Crores per MW. The Commission proposes to<br />
adopt a figure of Rs.5.60 Crores per MW as the capital cost. The capital cost adopted<br />
by the Commission in order No.3 <strong>dated</strong> 15-5-2006 included infrastructural development<br />
charges of Rs.25 lakhs per MW. This charge of Rs.25 lakhs has been struck down by<br />
the Commission on 19-09-2008 in M.P.No.27 of 2008 filed by the Indian Wind Energy<br />
Association. Setting off Rs.25 lakhs against the capital cost of Rs.5.60 Crores, the<br />
Commission arrives at a figure of Rs.5.35 Crores per MW as the capital cost.<br />
8.3 Life of Plant<br />
In <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006, the Commission considered the plant life as 20<br />
years. Most of the Commissions have adopted a plant life of 20 years for tariff<br />
determination purpose. The Commission considers it reasonable to retain the plant life of<br />
20 years for the proposed tariff revision.<br />
8.4 Depreciation Rate<br />
For the purpose of tariff determination, it is prudent to assume depreciation by<br />
the Straight Line Method (SLM) wherein the asset life is to be depreciated to a residual<br />
value of 10% of its initial value over the entire asset life of 20 years. This translates to an<br />
SLM depreciation rate of 4.50 % per annum. In <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006, the<br />
Commission have considered the depreciation rate of 4.50 % per annum. The<br />
Commission proposes to retain the same rate for the proposed tariff order.<br />
Depreciation rates adopted by other Commissions are listed below.<br />
Name of the Commission<br />
GERC<br />
KSERC<br />
MPERC<br />
KERC<br />
Rate of Depreciation adopted<br />
4.5% (90% divided by 20<br />
years which is the expected life of the project<br />
4.5% (90% divided by 20<br />
years which is the expected life of the project<br />
Depreciation @ 7% per annum for first 10 years and balance<br />
20 % is to be depreciated @ 2% per annum in the next 10<br />
years so that the asset is depreciated to a residual value of 10<br />
% of its initial value<br />
7% per annum under SLM<br />
51
8.5 Operation and Maintenance Expenses<br />
The Commission in <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006 has stipulated 1.10% of the<br />
capital cost of the project as O&M expense for the first five years, which would be<br />
increased thereafter with a simple escalation of 5% per year. In the round table meet<br />
O&M expense of 1.8% to 1.9% have been suggested. One of the views expressed in the<br />
round table conference is that the O&M cost is increasing with the increase in cost of<br />
consumables hence it has to be reasonably escalated for the life span of the machine.<br />
The O&M expense assumed by other Commissions are tabulated below.<br />
Name of the ERC O&M Expenditure as Percentage of Capital Cost<br />
GERC<br />
1.5% with 5% escalation<br />
KSERC<br />
1.3% with 4% escalation<br />
MPERC 1 % for the first 5years; thereafter simple escalation of 5%<br />
RERC<br />
1.25% with an escalation of 5% per annum<br />
KERC 1.25% with an annual escalation of 5%.<br />
MERC<br />
1.5 % for 3 years; 2% for 4 th year and 5% escalation there after<br />
The O&M costs adopted by the other Commissions are slightly higher than the<br />
O&M cost adopted by TNERC. But TNERC considers a separate insurance cost of<br />
0.75% which is not considered by most of other Commissions. Taking into account the<br />
insurance cost the O&M charges adopted in Commission’s order No:3 <strong>dated</strong> 15-05-2006<br />
is quite reasonable. Since a higher capital cost has been considered for the next control<br />
period resulting in higher allocation of money for the O&M expenses, the Commission<br />
proposes to retain the procedure followed in the Commission’s tariff order <strong>dated</strong><br />
15-5-2006 towards allocation of O&M expenses.<br />
8.6 Insurance charges<br />
The Commission in <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006 adopted an insurance rate of<br />
0.75% on the project cost for 5 years and reduction of 0.5% every year thereafter. Since<br />
the insurance premium is charged in proportion to the net worth of the machine after<br />
deducting the depreciation every year, the Commission proposes a insurance rate of<br />
0.75% on the project cost for the first year and reduction of 0.5% every year thereafter.<br />
Suggestions are invited.<br />
52
8.7 Debt-equity ratio<br />
As per the guide lines specified in the tariff policy for financing of future capital<br />
cost of projects, a debt : equity ratio of 70:30 should be adopted. A debt-equity ratio of<br />
70: 30 has been considered in the Commission’s <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006. This ratio<br />
has been adopted by most of the Commissions. It is proposed to retain the same for the<br />
proposed tariff revision.<br />
8.8 Interest Costs on Debt<br />
Interest on term loan was assumed as 9 % for all categories as per IREDA norms<br />
for renewable energy projects in the last tariff order of the Commission. It was reported<br />
in the round table conference that the interest rate of IREDA has risen to 12%. The other<br />
experts and developers have reported an interest rate of 13% to 14%. Interest rates<br />
adopted by the other commissions are tabulated below.<br />
Name of the ERC<br />
Interest rate adopted<br />
GERC 9%<br />
KSERC 9%<br />
MPERC 11%<br />
RERC 10%<br />
KERC 11%<br />
MERC 12.5%<br />
The Commission proposes an interest rate of 12% recommended by the IREDA. The<br />
investor is free to avail a cheaper loan, if available.<br />
8.9 Term of Loan<br />
IREDA loans are available with the term structure of 10 years with a moratorium<br />
of one year. In <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006, the Commission have considered the terms<br />
of loan of 10 years with one year moratorium. The Commission proposes to retain the<br />
same terms of loan for the next tariff order.<br />
8.10 Return on Equity (RoE)<br />
The Commission in <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006 stipulated the RoE of 16% pretax.<br />
In the round table meet a RoE of 16% post tax (IRR of 12% to 14%) has been<br />
suggested. ROE adopted by the other commissions are tabulated below.<br />
Name of the ERC<br />
GERC<br />
KSERC<br />
MPERC<br />
KERC<br />
MERC<br />
HERC<br />
ROE adopted<br />
14% post tax<br />
14% post tax with MAT at 10.1% on ROE<br />
16% pre tax<br />
16% post tax with MAT at 7.5% on ROE<br />
16% pre tax<br />
16% pre tax<br />
53
The Tariff Regulations of the Commission stipulate 14% post tax RoE for conventional<br />
fuel based generating stations. With the objective of promoting wind based power<br />
generation, the Commission proposes to adopt the same rate of 14% post tax. The<br />
corresponding pre tax RoE would be 17.63% at the current rate of corporate and income<br />
tax.<br />
8.11 Tariff Rate<br />
The financial and operating parameters proposed in the paper and the projected<br />
cost plus single part average tariff for 20 years for new wind energy projects are<br />
tabulated below.<br />
Description of<br />
financial and<br />
operating parameters<br />
Values proposed in the paper for the financial and<br />
operating parameters and the cost plus single part<br />
average tariff worked out for 20 years for the new WEGs<br />
to be Commissioned in the new control period<br />
Capacity Utilization<br />
Factor<br />
27.15% and de-rating @1% for every year after ten years<br />
Life of the machine 20 years<br />
Project Capital cost Rs 5.35 Crores<br />
Debt: Equity ratio 70:30<br />
Interest on Loan 12.00%<br />
Return on Equity 17.63% Pre-Tax<br />
Loan Repayment<br />
period<br />
10 years with 1 year moratorium period<br />
O&M Charges<br />
Depreciation<br />
Residual Value<br />
Insurance<br />
Cost plus single part<br />
average tariff for 20<br />
years<br />
1.10% of capital cost with escalation of 5% per year after 5<br />
years.<br />
4.5% Straight Line Method<br />
10% of capital cost.<br />
0.75% of capital cost in the first year with reduction of 0.5%<br />
every year thereafter<br />
Rs.3.40 per kWh<br />
As regards revision of rates for Group I and Group II WEGs, the Commission retains the<br />
rates for the present and has decided to collect exhaustive data on decline of efficiencies<br />
of old WEGs, de-rating the CUF of old WEGs etc. from the Wind Mills Association as<br />
well as TNEB and then take a view.<br />
54
8.12 Tariff Review Period / Control Period<br />
With regard to tariff Review Period / Control Period, the specific provisions of the<br />
Regulations on “Power Procurement from New and Renewable Sources of Energy,<br />
2008” are reproduced below:<br />
6. Agreement and Control period<br />
The tariff determined by the commission in the tariff order shall be<br />
applicable for the power purchase agreement period of twenty years. The<br />
control period may be three years. When the Commission revisits the<br />
tariff and allied issues after the control period, the revision shall be<br />
applicable only to the generator of new and renewable energy sources<br />
commissioned after the date of such revised order.<br />
In <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006, the Commission fixed a control period of three<br />
years. The Commission in its order <strong>dated</strong> 19-09-2008, against the petitions M.P. Nos. 9,<br />
14 & 23 of 2008 filed by Indian Wind Energy Association (InWEA) and others, have<br />
decided that “the control period of three years as specified in <strong>Order</strong> No. 3 <strong>dated</strong><br />
15.05.2006 is waived from the date of issue of this order”. In the round table meet,<br />
revised control period with escalation indexing mechanism was suggested. It has also<br />
been recommended to reduce the control period to two years or one year considering<br />
the vast increase in the input costs. Considering all the above, the commission proposes<br />
to reduce the control period from three years to two years.<br />
Other alternative is to arrive at a base tariff taking into account the existing<br />
financial parameters and escalate it every year for ten years or 20 years as done by the<br />
Maharashtra <strong>Electricity</strong> <strong>Regulatory</strong> Commission. This may resolve the control period<br />
issue.<br />
Suggestions/comments are invited from stake holders in this regard.<br />
8.13 CDM Benefits<br />
In the international market, one CER (Certified Emission Reduction) is being<br />
traded around 25 US dollars (This may vary from time to time depending upon the<br />
demand and supply of CERs). As per the base line emission data provided by the<br />
Central <strong>Electricity</strong> Authority for the Indian Grid, WEGs may receive CDM benefit of<br />
around one rupee per kWh. Regarding the sharing of this benefit, the guide lines<br />
specified in the National Tariff Policy is reproduced below.<br />
55
5.0 GENERAL APPROACH TO TARIFF<br />
(i) Benefits under CDM<br />
Tariff fixation for all electricity projects (generation, transmission and<br />
distribution) that result in lower Green House Gas (GHG) emissions than<br />
the relevant base line should take into account the benefits obtained from<br />
the Clean Development Mechanism (CDM) into consideration, in a<br />
manner so as to provide adequate incentive to the project developers.<br />
The formula adopted by the other Commissions to share CDM benefits is tabulated<br />
below.<br />
Name of ERC Share of CDM by WEG Share of CDM by<br />
Distribution Licensee<br />
GERC 75% 25%<br />
RERC 75% 25%<br />
KERC 100% 0%<br />
The Commission proposes 50% share of CDM benefits to the generators in line with<br />
the Tariff Policy. The balance 50% CDM benefit will be equally shared by the STU and<br />
distribution licensee. STU and distribution licensee shall account for the CDM receipts in<br />
the next ARR filing.<br />
8.14 Minimum purchase requirements<br />
With regard to fixing of minimum purchase requirement from NCES, the following<br />
important factors have to be considered.<br />
‣ Total quantum of energy required for the State<br />
‣ Total potential for renewable energy generation in the State<br />
‣ Quantum of renewable energy being generated<br />
‣ Power purchase tariff for renewable energy<br />
‣ Firm or infirm nature of the NCES power<br />
‣ Quantum of penetration of NCES power and its impact on the grid<br />
‣ Commercial impact on retail tariffs due to purchase of renewable power<br />
In <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006, the Commission fixed 10% as the minimum<br />
percentage of power each distribution licensee shall purchase from NCES sources out of<br />
his total consumption in his area of supply as required by Section 86(1)(e) of the Act. As<br />
per the data furnished by TNEB for 2007-08, energy available for sale by TNEB is 64430<br />
MU out of which the contribution from NCES is 7507 MU. Assuming that TNEB buys<br />
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35% of the total wind energy generated, it constitutes only 4.08% of TNEB’s total<br />
consumption. The Commission proposes to fix 7.5% as the minimum purchase<br />
obligation by the distribution licensee in the next tariff order. There are few other related<br />
points open to discussion in this issue. They are:<br />
1. NCES power injected into the TNEB grid is 7507 MU. Had there been no wheeling of<br />
NCES power to the HT services from NCES, TNEB have to purchase equivalent<br />
quantum of power from other sources to supply to those HT services due to shortage of<br />
power in the State. Therefore, there are suggestions that wheeling of power also could<br />
be reckoned as purchase for consumption in the distribution licensee’s area. In that<br />
case, the present NCES share of licensee’s consumption constitutes 11.65% instead of<br />
4.08%. In such a case, the minimum purchase obligation needs to be enhanced to 15%.<br />
2. Basically, wind power is an “infirm power”. Its penetration beyond certain limit may<br />
affect the grid stability especially when there is no adequate spinning reserve in the<br />
Southern Regional Grid. In the prevailing power shortage situation, when there is no<br />
adequate spinning reserve, will it be appropriate to fix the minimum purchase obligation<br />
based on the wind power penetration?<br />
3. As per Section 86(1) (e), the Commission shall specify;<br />
……for purchase of electricity from such (NCES) sources, a percentage of the<br />
total consumption of electricity in the area of a distribution licensee.<br />
The Act does not specify whether the percentage is minimum or maximum. Should we<br />
fix a maximum or a minimum? Should we fix a total percentage for all the NCES power<br />
put together or category wise percentage?<br />
Suggestions are invited on the above points.<br />
8.15 Reactive Power Charges<br />
Due to its inherent characteristics, most of the WEGs are prone to draw reactive<br />
power from the grid if adequate power factor correction is not provided. During the wind<br />
season, the WEGs contribute around 15-20% of the grid demand and grid stability will<br />
be at risk if we allow the WEGs to draw more reactive power from the grid. The<br />
Commission in <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006 stipulated a charge of 25 paise / kVARh for<br />
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the WEGs who draw reactive power up to 10% of net active energy generated. In order<br />
to curtail the WEGs who draw more than 10% of net active energy generated, as a<br />
deterrent, the Commission in the said <strong>Order</strong> imposed a charge of 50 paise per kVARh<br />
considering its negative impact on the grid. It is proposed to retain the same for the next<br />
tariff order. Reactive energy charges adopted by the other Commissions are tabulated<br />
below.<br />
Name of the ERC<br />
Reactive energy charges<br />
APERC 10 paise per kVArh upto 10% of active power supplied & 25<br />
paise per kVArh above 10%<br />
GERC 10 paise per kVArh up to 10% of active power supplied & 20<br />
paise per KVArh above 10%<br />
RERC<br />
5 paise per year w.e.f. 01/04/2006 with escalation of 5% per year<br />
MPERC<br />
27 paise per kVArh<br />
KERC<br />
Rs. 0.40 Per kVArh<br />
MERC<br />
25 paise per kVArh<br />
8.16 Cross subsidy surcharges<br />
The present order of the Commission stipulates the same cross subsidy<br />
surcharge both for generation from conventional sources as well as renewable sources.<br />
Gujarat <strong>Electricity</strong> <strong>Regulatory</strong> Commission has proposed to eliminate the cross subsidy<br />
surcharges for generation from renewable sources. Certain Commissions such as<br />
Maharashtra, Utter Pradesh and Andhra Pradesh have totally done away with cross<br />
subsidy surcharges for generation from both conventional and renewable sources. The<br />
following tabulation is illustrative:<br />
State<br />
Cross subsidy surcharge in<br />
rupees for generation from<br />
conventional sources<br />
Maharastra Nil Nil<br />
Gujarat 1.00<br />
0.37* (draft order issued)<br />
Utter Pradesh Nil Nil<br />
Andhra Pradesh Nil Nil<br />
Cross subsidy surcharge in<br />
rupees for generation from<br />
renewable sources<br />
1.00<br />
Nil * (draft order issued)<br />
TNEB has filed a petition with the Commission to temporarily relinquish cross<br />
subsidy surcharge for third party purchase by the industrial and commercial consumers<br />
in the State. In order to promote generation from renewable energy sources, the<br />
Commission proposes to determine the cross subsidy surcharge at 50% of the level<br />
prescribed for generation from conventional energy sources.<br />
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8.17 Evacuation Facilities<br />
With regard to evacuation facilities the guide lines specified in the Regulations on<br />
“Power Procurement from New and Renewable Sources of Energy, 2008” are<br />
reproduced below:<br />
3(3) Evacuation facilities shall be provided by the State Transmission Utility (STU)<br />
/Distribution licensee as per the Commission’s Intra State Open Access Regulations<br />
2005, Central electricity Authority (Technical Standards for connectivity to the Grid)<br />
Regulations, 2006 and <strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Grid Code. The cost of interfacing lines,<br />
switch gear, metering, protection arrangement and related other equipments up to the<br />
interconnection point shall have to be borne by the generators, but the work shall be<br />
executed by STU/distribution licensee. The developer may be permitted to execute the<br />
works as per the terms and conditions of the STU/Licensee.<br />
Provided that, in the case of sale of entire power to the distribution licensee by any new<br />
and renewable source based generator, the cost of interfacing lines up to the<br />
interconnection point shall have to be borne only by the STU/ distribution licensee.<br />
Provided further that in case where the new and renewable source based generator<br />
referred to in the first proviso who has entered into an EPA with the distribution licensee<br />
referred to therein for the sale of entire power to the said distribution licensee decides to<br />
use such power agreed to be sold to the said distribution licensee, for his captive use or<br />
for sale of such power to a third person or to a distribution licensee other than the<br />
distribution licensee referred to above before the expiry of the period referred to in such<br />
EPA, then he shall be bound to reimburse the entire cost of interfacing lines to the<br />
distribution licensee with whom he has executed such EPA, before the wheeling of power<br />
to his captive use or sale to third person or distribution licensee other than the<br />
distribution licensee with whom the said EPA has been executed by him”<br />
In addition to the above stipulation, the Commission proposes the following procedure<br />
for the next tariff order in line with the previous order.<br />
a. STU shall within thirty days of receipt of application from WEGs, intimate whether<br />
or not long term access can be allowed without further system strengthening.<br />
b. If further system strengthening is essential, the results of the study conducted by<br />
the STU based on the request of WEGs shall be intimated within ninety days of<br />
such request of WEGs<br />
c. Feasibility based on the system studies shall be established at the earliest possible<br />
but not later than six months.<br />
d. Clearances, approvals, certificate, if any, required by WEGs shall be issued within<br />
a month’s time.<br />
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e. The distribution licensee/STU shall provide the shortest but reliable transmission<br />
facilities.<br />
f. No compensation shall be provided to the WEGs by the distribution<br />
licensee/STU for deemed generation benefits in case the transmission<br />
facility of the distribution licensee/STU fails due to reasons beyond their<br />
control.<br />
8.18 Metering and Communication Arrangements<br />
It is proposed to adopt the following procedure in the next tariff order.<br />
(1) The metering and communication arrangements shall be provided in accordance with<br />
the Commission’s Intra State Open Access Regulations 2005 and Central <strong>Electricity</strong><br />
Authority (Installation and Operation of Meters) Regulations, 2006 in consultation with<br />
Distribution Licensee/STU. The periodicity of testing, checking, calibration etc., will be<br />
governed by the Regulations issued by the Central <strong>Electricity</strong> Authority / Commission in<br />
this regard.<br />
(2) Main and Check Meters shall have facility to communicate its reading to State Load<br />
Dispatch Centre on real time basis or otherwise as may be specified by the Commission.<br />
Meter reading shall be taken as per the procedure devised by the TNEB/SLDC.<br />
(3) The term ‘Meter’ shall include Current transformers, voltage/potential transformers,<br />
wiring between them and meter box/panel etc.<br />
8.19 Energy Purchase Agreement<br />
Commission’s Regulation on “Power Procurement from New and Renewable<br />
Sources of Energy, 2008” stipulates the following regarding the period of agreement.<br />
Agreement and Control period<br />
The tariff determined by the commission in the tariff order shall be applicable for<br />
the power purchase agreement period of twenty years………………………<br />
Since the agreement period is twenty years, the terms and conditions including the<br />
purchase rate, as stipulated in the ensuing tariff order will continue to be applicable till<br />
the end of the agreement period of twenty years. The NCES generator shall sign an<br />
Energy Purchase Agreement (EPA) with the distribution licensee for a period of twenty<br />
years for sale of power. The distribution licensees shall draft an EPA taking cognizance<br />
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of the tariff provisions and EPA related principles elaborated in this order and file a<br />
model EPA for approval of the Commission. The parties to the agreement should<br />
execute the agreement as per the Commission’s approved PPA. The distribution<br />
licensee should sign the EPA within one month from the date of submission of the<br />
application with all relevant details for such an agreement by the WEGs. The agreement<br />
shall include a clause for penalty in case the developer winds up his operation before the<br />
twenty year power purchase agreement period. The Distribution licensee shall pay the<br />
required fee for each PPA executed as specified in the Commission’s Fees and Fines<br />
Regulation. The application fee and registration fee are specified in the Commission’s<br />
Open Access Regulation. The issues for discussion are:<br />
1. What penalty should be imposed in case the developer winds up his operation<br />
before the twenty year power purchase agreement period?<br />
2. Should a clause in the PPA be included to break out of the PPA by either party<br />
after giving three months notice?<br />
3. If so, what should be the terms and conditions for termination?<br />
Suggestions are invited.<br />
8.20 Payment Security to the WEGs to be provided by distribution licensee<br />
Clause 6.2 of the National Tariff Policy calls for adequate and bankable payment<br />
security arrangements to the generating companies. On the same lines, the<br />
Commission, in <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006 stipulated that a bankable security in favour<br />
of the generator for an amount equivalent to the average monthly bill shall be opened by<br />
the distribution licensee if required by the generator, in case an EPA is signed for power<br />
purchase between distribution licensee and the generator. The Commission proposes to<br />
retain the same procedure for the ensuing tariff order.<br />
8.21 Billing and Payment to NCES generator by the Distribution Licensee<br />
The Commission in <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006 stipulated that in case of NCES<br />
generators selling power to distribution licensees, the generator will raise the bill every<br />
month for the net energy supplied after deducting the charges for start up power,<br />
reactive power charges, etc as per this <strong>Order</strong>. The distribution licensee shall make<br />
payment to the generators within the same period prescribed for recovery of dues from<br />
the HT industrial consumers. It has been proposed to adopt the same procedure in the<br />
next tariff revision for WEGs. After the unbundling of TNEB, procedure for energy<br />
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accounting will be devised by the SLDC in accordance with <strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Grid<br />
Code (TNEGC) and submitted for approval of the Commission.<br />
9.0 ISSUES RELATED TO CAPTIVE USE AND THIRD PARTY SALE<br />
9.1 Grid Availability Charges<br />
Outage of the generator and providing start up power by the Licensee is a routine<br />
and frequent necessity for the WEGs. This shall be dealt with under unit to unit<br />
adjustment basis.<br />
9.2 Applicable Energy Charges<br />
When the generator is synchronized with the grid, energy charges shall be<br />
payable by the wind energy user, for the units supplied by the Distribution Licensee (i.e.<br />
balance units arrived at after subtracting the units supplied by the generator from the<br />
total consumption of the user during the billing month) at the applicable rate for that<br />
category of user. The time of day consumption (ToD) shall be charged for the net<br />
consumption only deducting the generated energy from the energy consumed during the<br />
respective time slots.<br />
9.3 Applicable Demand charges<br />
In line with <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006, the applicable demand charges are<br />
proposed as below:-<br />
In addition to energy charges stipulated above, the wind energy user shall pay<br />
applicable demand charges as specified below:<br />
There are 2880 time blocks of 15 minutes interval in a billing month. It is not feasible<br />
to segregate precisely the quantum of demand supplied in each time block in the billing<br />
month to the wind energy user by the generator and by the licensee distinctly. This<br />
segregation may be computed by matching the demand recorded in each time block at<br />
the generator end (A) with the demand recorded in the corresponding time block at the<br />
wind energy user’s end (B) then<br />
Case 1: If (B) is lesser than (A), it means there is no supply of demand by the licensee to<br />
the wind energy user.<br />
Case 2: If (B) is greater than (A), it means that there is supply of demand by the licensee<br />
in that respective time block.<br />
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As per the tariff order <strong>dated</strong> 15-3-2003, a demand charge in a billing month by<br />
any HT consumer is 90% of sanctioned demand or recorded demand which ever is<br />
higher. As the demand is recorded at every 15 minutes time block, the recorded<br />
demand will show the maximum demand recorded in any of the 15 minutes time slot in<br />
that billing period of one month.<br />
The probability of occurrence of case 1 is zero and the probability of licensee<br />
supplying the demand in any one of the time blocks in a billing month as in case 2 is<br />
100 percent. In such a scenario, whether the licensee is entitled to receive the demand<br />
charges in full, even though the generator is also injecting the demand into the grid<br />
continuously, needs to be addressed. There is no doubt that, all the fluctuation in the<br />
generator end and user end are met by the licensee. However, the percentage of the<br />
demand, injected by generator is also to be taken for consideration and to that extent,<br />
the demand charges receivable by the Licensee is to be restricted.<br />
Till a mechanism is put in place to ascertain the relation between the demand<br />
generated in each of the 2880 fifteen minutes time blocks and the demand recorded at<br />
the consumer end in the related time blocks, a reasonable approximation has to be<br />
followed to arrive at the demand supplied by the generator. The probability of meeting<br />
the demand of the wind energy user by the WEG and distribution licensee varies from<br />
0% to 100 % for both the parties. Therefore, it is considered prudent to convert the<br />
energy supplied by the WEG into an equated demand with reasonable approximations<br />
as the deemed demand supplied by the WEG to the wind energy user as detailed below:<br />
Average CUF assumed for tariff calculation 27.15%<br />
In <strong>Tamil</strong> <strong>Nadu</strong>, out of total wind energy generated, about 65% of energy is being<br />
adjusted for own use and 35% is being sold to TNEB. Therefore the proportionate CUF<br />
for adjustment of energy for own use is = 27.15X 0.65 = 17.65%<br />
The demand supplied by the wind energy generator = 17.65/ 0.9 = 19.61%<br />
0.9 being the power factor to be maintained by the user<br />
The demand charges payable by wind energy user will be calculated as below:<br />
Total generated units consumed by the user divided by (30 X 24 X Actual PF recorded<br />
during the billing month )<br />
_________________A<br />
Recorded demand (or) 90% of sanctioned demand, whichever is higher ___ B<br />
The demand supplied by the Licensee (B – A)<br />
_____ C<br />
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The demand charges payable by wind energy user = (A X 80.39% of applicable demand<br />
charges) + (C X applicable demand charges)<br />
For the present tariff applicable to HT Industry = (A X 0.8039 X 300) + (C X 300)<br />
In line with such an approximation, a deemed demand concept is proposed.<br />
The total demand of a wind energy user shall be reckoned as the recorded demand or<br />
90% of the sanctioned demand whichever is higher. A wind energy user draws power<br />
from two sources, namely wind energy generator and the licensee. In regard to the<br />
power drawn from the wind energy generator, he shall pay demand charges at the rate<br />
of 80.39% of the demand supplied by the generator. In regard to the balance demand<br />
supplied by the licensee, he will pay the full demand charges.<br />
9.4 Banking<br />
In <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006, the Commission permitted one year (from April<br />
to March) banking period for the WEGs with 5% banking charges. The banking charges<br />
shall be deducted in kind during the billing of every month for the quantum of units<br />
generated during the billing month minus consumption by the captive user end and/or<br />
third party end. Slot wise banking is permitted to enable unit to unit adjustments for the<br />
respective slots towards rebate/ extra charges. No carry over is allowed beyond the<br />
banking period. Such unutilized portion is eligible for encashment at the rate of 75 % of<br />
normal purchase tariff. The Commission proposes the same procedure for the next tariff<br />
order. The banking charges adopted by the other commissions are tabulated below.<br />
Name of the ERC Banking Period Banking Charges<br />
GERC Not allowed ---<br />
RERC 6 months ---<br />
MPERC Not allowed ---<br />
KERC --- 2% of energy input<br />
MERC 12 months ----<br />
9.5 Transmission & Wheeling charges and line losses<br />
As fixed in the previous tariff order, the Commission proposes transmission and<br />
wheeling charges of 5% in kind for WEGs which include the line losses. The<br />
transmission and wheeling charges fixed as above will get reduced, if the point of<br />
injection and point of drawal are in higher Extra High Voltages. Such cases shall be<br />
specifically brought to the Commission’s notice and approval obtained.<br />
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The transmission and wheeling charges adopted by the other commissions are tabulated<br />
below.<br />
Name of the ERC<br />
GERC<br />
RERC<br />
MPERC<br />
KERC<br />
MERC<br />
APERC<br />
WBERC<br />
Wheeling Charges<br />
4% of energy<br />
Below 132 kV, 50% of normal charges applicable to 33 kV<br />
declared by commission + Surcharge + Losses<br />
2% of energy + transmission charges as per ERC order<br />
5% of energy + Rs.1.15/kWh as cross subsidy for 3rd party sale.<br />
2% of Energy as wheeling + 5% as T&D loss<br />
At par with conventional Power<br />
7% of energy + open access charges<br />
9.6 Reactive Power Charges<br />
The reactive power charges as proposed in this <strong>Order</strong> would also apply to<br />
captive use and third party sales.<br />
9.7 Evacuation Facilities<br />
The evacuation facilities as proposed in this <strong>Order</strong> are applicable.<br />
9.8 Adjustment of Peak / off Peak power<br />
<strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006 specifies the following.<br />
Since all the generators and tied up users shall be provided with ToD meters, the<br />
adjustment of energy shall be done on slot to slot basis within the banking period as<br />
follows.<br />
i. Peak hour generation with peak hour consumption<br />
ii. Off-peak hour generation with off-peak hour consumption and<br />
iii. The normal hour generation with normal hour consumption.<br />
Units generated during a higher tariff ToD-slot could be consumed in a lower<br />
tariff ToD slot at the option of generators/users, but the reverse would not be allowed.<br />
The peak hour extra charges and off peak hour rebate shall be on net energy<br />
consumption after deducting generation during the respective peak hour block and off<br />
peak hour block. It is proposed to adopt the same procedure in the next tariff order.<br />
9.9 PF incentive / disincentive.<br />
<strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006 specifies the following on the above issue.<br />
65
The pf incentive / disincentive is applicable to all users on the current consumption<br />
charges bill based on the gross energy and applicable demand as per this order.<br />
However, the average pf recorded by the meter will be the reference for calculation of pf<br />
incentive / disincentive. The Commission proposes the same procedure for the next tariff<br />
revision.<br />
9.10 Energy Wheeling Agreement (EWA)<br />
<strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006 specifies the following on the above issue.<br />
The WEGs / third party buyer of power and the concerned distribution licensee<br />
shall sign an EWA for the purpose of wheeling of power from the WEGs to the CGP user<br />
/ third party buyer. The distribution licensees shall draft an EWA taking cognizance of the<br />
energy wheeling principles elaborated in this <strong>Order</strong> and submit the same for the<br />
approval of the Commission. The parties to the agreement shall adopt the format<br />
prescribed by the Commission. The distribution licensee should execute the EWA within<br />
one month from the date of submission of application with all relevant details for such<br />
agreement by the WEGs or the third party purchaser, as the case may be.<br />
The Commission proposes the same for the next tariff order. The issues for<br />
discussion are:<br />
1. Whether the tenure of the EWA should be same as that of the EPA signed with the<br />
CGP holder / third party buyer.<br />
2. Whether any exit provision should be specified in the EWA<br />
9.11 Payment of Security Deposit<br />
As specified in <strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006, the Commission proposes that two<br />
times of the maximum net energy supplied by the distribution licensee in a month in the<br />
previous banking period shall be taken as the basis for the payment of security deposit<br />
by the user to the distribution licensee. Suggestions are invited on whether the period<br />
should be changed to one calendar year as specified in the <strong>Tamil</strong> <strong>Nadu</strong> Distribution<br />
Code instead of the banking period.<br />
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9.12 Restrictions on service category for Captive use / third party sale<br />
The Act does not impose any restrictions for captive use / third party sale of<br />
energy by a generator in regard to service category and numbers. The generator is at<br />
liberty to adjust<br />
the energy on unit-to-unit basis for captive use / third party sale in any category and to<br />
any numbers of HT services. There are requests by the generators to adjust the power<br />
in their LT services also. It is felt that with the present energy accounting facilities<br />
available with TNEB/SLDC, it is difficult for the SLDC /TNEB to extend energy<br />
accounting and billing facilities to the LT consumers. Therefore, the Commission<br />
suggests that the adjustment may be restricted to HT services only. Suggestions are<br />
invited on extending captive use/third party sale facilities to LT services.<br />
9.13 Billing and payment procedure<br />
<strong>Order</strong> No.3 <strong>dated</strong> 15-5-2006 specifies the following on the above issue.<br />
In case of captive use / third party purchase, the distribution licensee shall raise the bill<br />
after accounting for the net energy supplied at the end of each monthly billing cycle.<br />
Meter reading should be taken on the same day at WEG end and captive user / third<br />
party purchaser end. The generation at generator end shall be communicated to all the<br />
circles of the captive users / third party purchaser within two days so as to facilitate for<br />
matching generation with consumption in the same billing month. Unit to unit adjustment<br />
will be done on slot to slot basis as specified in this order. Excess drawal will be charged<br />
under respective tariff applicable to the user. The distribution licensee shall raise the bill<br />
to the user after accounting for generation and consumption at the end of each monthly<br />
billing cycle subject to recovery of transmission and wheeling charges including the<br />
losses in kind. After the unbundling of TNEB, the procedure for energy accounting will be<br />
devised by the SLDC in accordance with TNEGC and submitted for the approval of the<br />
Commission. Suggestions are invited.<br />
9.14 Other Open Access Charges<br />
Other open access charges such as scheduling charges etc as specified in the<br />
Commission’s Open Access Regulation and subsequent amendments issued from time<br />
to time would be applicable.<br />
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Annexure – II<br />
COMMENTS OF THE STAKE HOLDERS ON THE CONSULTATIVE PAPER<br />
ON “POWER PROCUREMENT BY DISTRIBUTION LICENSEES FROM WIND<br />
ENERGY GENERATORS AND ALLIED OPEN ACCESS ISSUES”<br />
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Annexure – II<br />
COMMENTS OF THE STAKE HOLDERS ON THE CONSULTATIVE PAPER<br />
ON “POWER PROCUREMENT BY DISTRIBUTION LICENSEES FROM WIND<br />
ENERGY GENERATORS AND ALLIED OPEN ACCESS ISSUES”<br />
1. APPLICABILITY OF THE PROPOSED ORDER<br />
Thiru G.Ramakrishnan, Retired Chief Engineer/TNEB:- New tariff order shall be<br />
applicable to WEGs commissioned on or after this date irrespective of whether tie up<br />
approval or agreements is executed between the WEGs and Distribution Licensees<br />
before this date.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- The group 1 and group 2 WEGs have not come forward<br />
to execute the Energy Purchase Agreement and Energy Wheeling Agreement so far as<br />
per the order <strong>dated</strong> 22-05-2008 of the Commission. Hence, these WEGs are not eligible<br />
for the proposed revision of the tariff.<br />
2. ADJUSTMENT OF PEAK/OFF PEAK HOURS<br />
M/s.Indian Wind Power Association:- Terminology used under this could be peak<br />
hour, night hour and other hour as in practice now rather than peak hour, off peak hour<br />
and normal hour.<br />
M/s.Acciona Wind Energy Pvt. Ltd., Bangalaore:- For adjustment of Peak/Off peak<br />
power, the practice being followed in Maharashtra should be followed.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- Unit to unit adjustment need not be considered.<br />
Interchanging of slots is not accepted by the Commission in order No.3 and the same<br />
was reiterated in the orders on MP No. 7 of 2007 and hence adjustment has to be made<br />
against the generation slots only.<br />
3. BANKING<br />
M/s.Indian Wind Power Association:- A major boost to the growth of the wind sector in<br />
the State has been the provision for banking facility for a period of one year with 5%<br />
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anking charges in kind. The provision for payment of the unconsumed banked units at<br />
75% of the procurement cost would be fair under normal circumstances, but not during<br />
R&C period. TNEB should be asked to pay at least 100% of the procurement tariff for<br />
wind power prevailing on the date to the investors irrespective of whether or not they<br />
have signed the new agreement.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association:- WEGs are not allowed to consume the<br />
whole of energy produced at the consumption end owing to Restriction and Control of<br />
Power Supply. Besides, the entire energy banked is also not allowed to be encashed.<br />
Draft of EWA needs to be revised incorporating necessary provisions for the TNEB’s<br />
failure to allow the consumer in not consuming the energy at his consumption end for<br />
any reason attributable to TNEB.<br />
M/s.Sri Amaravathi Spinning Mills, Karur:- Due to power cut, the WEGs are not able<br />
to consume all the generated units and therefore requested the Commission that the<br />
banked units must be purchased by TNEB at Rs.2.70 per unit.<br />
M/s.Acciona Wind Energy Pvt. Ltd:- Banking should be allowed for 12 months but with<br />
nil charges<br />
M/s.Winwind Power Energy Private Limited, Chennai:- Banking charges should be<br />
made nil as in case of States like Maharashtra.<br />
Power Engineers Society of <strong>Tamil</strong> <strong>Nadu</strong>:- Banking may be permitted for one month<br />
alone and balance energy shall be waived.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- This was the concession extended to promote wind<br />
energy in the early years. Now the bankable capacity has grown up to a significant<br />
extent and even poses a problem to grid management during the period of deficit<br />
situation. The banking facility should be restricted to one month instead of allowing<br />
yearlong banking and the banking charges should be increased to 15%.<br />
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4. Billing and payment procedure<br />
M/s.Indian Wind Power Association:- Current provision of making payment to the<br />
generators may be retained. Commission should prescribe penal charges for non<br />
payment to the generators on due date and this should be made automatic. Commission<br />
could fix the penal charge at the same rate at which the distribution licensee has been<br />
collecting penal charges from HT consumers for non payment of bills.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association:- Delay of more than 2 months is occurring<br />
in every payment by TNEB. Hence, this provision should be more specific with an action<br />
plan.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- NLC and NTPC are offering 30 days time to TNEB for<br />
payment of their monthly energy bills. Commission may also consider the period of 30<br />
days for the payment of the wind energy bills in view of the processing time required at<br />
the circles, lead time required between the indent for funds and allotment of funds for<br />
payment at the circles.<br />
Indian Renewable Energy Development Agency Limited:- Present practice of raising<br />
the bill after accounting for generation and consumption at the end of each monthly<br />
billing cycle subject to recovery of transmission and wheeling charges may be continued.<br />
5. CAPITAL INVESTMENT<br />
M/s.Indian Wind Power Association:- The following are the rates of per MW capital<br />
cost for different manufacturers after deduction of Infrastructure Development Charges:-<br />
Vetsas - Rs. 6.30 crores<br />
Sriram Leitwind - Rs. 6.33 crores<br />
Suzlon - Rs. 6.00 crores<br />
Enercon - Rs. 5.50 crores<br />
A simple average price of Rs. 6.00 crores per MW may be followed by the Commission.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association:- Capital cost has to be revised at least by<br />
another Rs.10 lacs and it can be taken as Rs.5.45 crores per MW, considering various<br />
transaction costs.<br />
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M/s.Indian Wind Energy Association:- Indexing mechanism may be considered as<br />
specified by the Hon’ble Rajasthan <strong>Electricity</strong> <strong>Regulatory</strong> Commission as it automatically<br />
adjusts the cost with the change in underlying tariff parameters.<br />
M/s.Thiru G.Ramakrishnan:- The cost of Infrastructure Development Charges (IDC) of<br />
Rs.25 Lakhs may be added to the cost of WEGs and may be fixed as Rs.5.60 crores<br />
since the TNEB will not be in a position to lay the line required for evacuating the WEG<br />
generated energy in time due to its own procedure of procuring materials required and<br />
executing the lines.<br />
M/s.Acciona Wind Energy Pvt. Ltd.:- The cost of modern large wind turbines is more<br />
than Rs.6.5 crores/MW.<br />
M/s.Winwind Power Energy Private Limited, Chennai:- The present day capital<br />
investment cost for WEG is Rs. 7 Crores per MW and no WEGs available at the price of<br />
5.35 Crores per MW, at present.<br />
M/s.Indian Wind Turbine Manufacturers Association:- Due to steep increase in the<br />
prices of metals, cement and transportation, the cost of wind energy projects have also<br />
increased. Hence the Commission should take project cost of Rs.6.05 Crores/MW.<br />
Thiru Singhan Ragu, Ooty:- With the advent of economic recession world over and the<br />
technological advancement in wind turbine, there exists every possibility that the capital<br />
cost of wind generation may come down.<br />
Power Engineers Society of <strong>Tamil</strong> <strong>Nadu</strong>:- If the cost plus principle is adopted, the<br />
capital cost shall be capped to Rs.4 crores per MW.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- Cost of Rs.4 to 4.5 crores / MW may be considered as<br />
the capital investment and the Commission may also form the ‘Expert Committee’ for<br />
determining the capital cost of the wind machine. The Commission should investigate<br />
the correct and actual cost of installing 1 MW of WEG before proceeding to work out the<br />
tariff.<br />
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Ministry of New and Renewable Energy:- A capital cost of Rs.5.5 to 5.7 crores per<br />
MW may be considered. The capital cost may be linked to indexing mechanism for<br />
provision of automatic revision of tariff.<br />
Indian Renewable Energy Development Agency Limited:- The average project cost<br />
per MW is worked out to Rs.5.61 crores which is based on the 36 applications received<br />
at IREDA from April, 2007 to November, 2008 aggregating to 442.13 MW.<br />
6. CLEAN DEVELOPMENT MECHANISM (CDM)<br />
M/s.Indian Wind Power Association:- For successful registration of the project one<br />
has to prove that without CDM benefits the investments in wind power projects are not<br />
viable at all. Under the above circumstances, if the investors are asked to share the<br />
benefit from CDM with the STU and Distribution Licensee, it will only prove that the<br />
investments in WEGs are otherwise profitable and that the benefit coming out of the<br />
CDM is only additional to the normal profit that is being earned. This will send a wrong<br />
signal to the Executive Board of UNFCCC and the probability of the Indian wind sector<br />
projects getting registered will further reduce. Further, with the current recessionary<br />
trend being faced globally, the prices of CERs have also come down significantly.<br />
Commission may not include the discussion on sharing of CDM for the sake of growth of<br />
wind industry in the State.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association:- The rationality behind the sharing of<br />
CDM revenue by the TNEB has not been mentioned in the consultative paper. The<br />
question of sharing with others will arise, only when the other person is having a clear<br />
stake on the project. Only when the WEG proves that without CDM revenue, the whole<br />
project is not viable, it can be considered for CDM revenues. TNEB is not investing<br />
anything on the WEG on its own and therefore, it cannot be a stake holder and hence,<br />
the rationality to claim a share in the revenue alone is not a good ethical factor.<br />
M/s.Indian Wind Energy Association:- The Hon’ble Commission should limit the CDM<br />
sharing between the developer and the licensee on 75:25 basis as being followed in<br />
Gujarath and Rajasthan.<br />
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M/s.Sri Amaravathi Spinning Mills:- The sharing of CDM benefits at 50:50 ratio with<br />
TNEB will dampen the spirit of the potential investors.<br />
M/s.Rogini Mills:- TNEB is not helpful in any occasion to WEGs and demanding the<br />
share of CDM benefits is not correct in any way.<br />
M/s.Acciona Wind Energy Pvt. Ltd:- 50% sharing of the CDM benefits with the State<br />
utility is not acceptable because WEGs are only taking risk in developing the projects.<br />
M/s.Winwind Power Energy Private Limited:- The full benefit of CDM revenue should<br />
be allowed to be retained by investor as being the case with most of the other States.<br />
M/s.Indian Wind Turbine Manufacturers Association:- CDM benefit should only go to<br />
the investors.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- Commission proposal of sharing the CDM benefits in<br />
the ratio of 50% by the WEGs and the balance 50% between the STU and the<br />
Distribution Licensee is acceptable.<br />
Ministry of New and Renewable Energy:- The principles adopted by the FOR working<br />
group may be considered on the issue of sharing CDM benefits between the licensee<br />
and the promoter.<br />
7. CONTROL PERIOD<br />
M/s.Indian Wind Energy Association:- Commission should specify control period of 2<br />
years. Commission should also clarify that the new Control Period shall be effective from<br />
September 20, 2008, the date of passing the <strong>Order</strong> for curtailing the control period<br />
specified in the <strong>Order</strong> No. 3 <strong>dated</strong> 15-05-2006.<br />
M/s.Acciona Wind Energy Pvt. Ltd.:- Regarding the control period, the approach taken<br />
by Maharashtra ERC should be taken, which says that a review of the base tariff for<br />
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wind energy should be done every year that considers prevailing conditions in the<br />
market.<br />
M/s.Winwind Power Energy Private Limited:- Base tariff should be arrived and should<br />
be escalated every year for 20 years. This will ensure that all investors get reasonable<br />
returns close to the ongoing rates, considering time value of money and inflation.<br />
M/s.Super Wind Project Private Limited and M/s.Simran Wind Project Private<br />
Limited:- Commission in its order <strong>dated</strong> 19-09-2008, against the petitions M.P. Nos. 9,<br />
14 and 23 of 2008 filed by M/s. InWEA and others passed the order that the control<br />
period of three years as specified in order no. 3 <strong>dated</strong> 15-05-2006 is waived from the<br />
date of issue of the order. Hence, the new control period should be commenced from 19-<br />
09-2008.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- As per the section 10.2 of TNERC order No.3 <strong>dated</strong> 15-<br />
05-2006, the revisions made by the Commission after the control period will be binding<br />
on the new generators who have started generating after issue of revised order. TNEB<br />
agrees with the proposal of revising the control period from 3 to 2 years. However, this<br />
will increase the work load of the Commission and hence request the Commission to<br />
revive the control period of 3 years.<br />
Indian Renewable Energy Development Agency Limited:- Due to volatility in capital<br />
costs, control period may be reduced from 3 years to 2 years.<br />
Ministry of New and Renewable Energy:- Commission may specify the control period<br />
of 2 years and Commission should clarify whether the new control period shall be<br />
effective from 20-09-2008, the date of passing the order for curtailing the control period<br />
specified in the order No.3 <strong>dated</strong> 15-05-2006. They welcomed the Commission’s<br />
proposal of keeping the proposed tariff applicable for a period of 20 years, since this<br />
provides much needed regulatory clarity and certainty for the development of wind<br />
energy projects.<br />
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8. CROSS SUBSIDY SURCHARGES<br />
M/s.Indian Wind Power Association:- There should not be any cross subsidy charges<br />
for generation from renewable energy sources.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association:- The Cross subsidy charge at 50% of the<br />
level prescribed for generation from conventional energy sources is too high, considering<br />
the National <strong>Electricity</strong> Policy and also the related provisions of the <strong>Electricity</strong> Act, 2003,<br />
particularly on the aspect of promotion of electricity generation through non-conventional<br />
energy sources. The cross subsidy charges proposed may be dropped.<br />
M/s.Indian Wind Energy Association:- Open access transactions involving renewable<br />
power such as wind energy, should be exempted from levy of cross subsidy surcharge<br />
and the open access consumers availing renewable power (wind energy) should not be<br />
subjected to payment of surcharge.<br />
M/s.Acciona Wind Energy Pvt. Ltd:- The cross subsidy surcharge should be made nil<br />
as being considered in the State of Gujarat.<br />
M/s.Winwind Power Energy Private Limited:- Third party sale should be provided with<br />
all incentives and should not be burdened with any extra surcharges. Therefore, cross<br />
subsidy charges should not be levied for third party sales for wind power generation.<br />
M/s.Indian Wind Turbine Manufacturers Association:- As per the formula prescribed<br />
by the National <strong>Electricity</strong> Policy, the cross subsidy surcharge is independent of<br />
renewable energy sources. Therefore power from conventional sources is not<br />
comparable even at marginal level. The other States like Maharashtra, Gujarath,<br />
Karnataka, Rajasthan and Andhra Pradesh have exempted wind from cross subsidy<br />
surcharge.<br />
Power Engineers Society of <strong>Tamil</strong> <strong>Nadu</strong>:- Should be firm on cross subsidy surcharges<br />
as this is a social commitment.<br />
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<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- Cross subsidy surcharge may be uniformly levied both<br />
on the conventional and non conventional energy sources.<br />
9. CAPACITY UTILISATION FACTOR (CUF)<br />
M/s.Indian Wind Power Association:- The capacity utilization factor assumed by the<br />
Commission at 27.15% for determining the tariff is on a higher side. The potentially good<br />
windy sites have all been exhausted and the new windmills are getting installed in class<br />
‘C’ sites. The ‘A’ and ‘B’ class sites in <strong>Tamil</strong> <strong>Nadu</strong> are also yielding less because of over<br />
crowding and are comparable to the sites available elsewhere in the country. For<br />
instance, the CUF assumed in Gujarat is 23%, Madhya Pradesh is 22.5%, Maharashtra<br />
is 20%, Rajasthan is 21 and 20%. Only Karnataka has assumed a higher CUF of 26.5%.<br />
Further, CUF has to be determined not only based on sites but also taking into account<br />
the host of other factors like, the availability of evacuation infrastructure, demand for<br />
electricity as well as the mix of various sources. When there is no adequate evacuation<br />
infrastructure as in the case of <strong>Tamil</strong> <strong>Nadu</strong>, possible generation is lost. Similarly, when<br />
the demand for electricity is low like during the monsoon period or during recessionary<br />
period like the one that is being faced, the utility does not want to generate more<br />
electricity as this would lead to higher frequency and some body else could draw this<br />
free power. The easiest generation that could be shut down is the WEG and they<br />
therefore suffer. Similarly, when a utility has a choice of different sources of energy, they<br />
prefer to draw the power from sources other than wind, since wind power cannot be<br />
scheduled. Therefore, the CUF could be considered at a lower level around 23% in<br />
<strong>Tamil</strong> <strong>Nadu</strong>.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association:- The main areas of consideration for<br />
determination of CUF are:<br />
(a) Wind availability<br />
(b) Grid availability and<br />
(c) Machine availability.<br />
Further, the grid availability has not been taken into consideration while assessing the<br />
CUF/PLF. TNEB for the past two years has started imposing announced and unannounced<br />
power shedding and thereby, not permitting the WEGs owners to consume<br />
their energy at their consumption end. This State of affairs is continuing for almost two<br />
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years. The recent order on Restriction and Control by the Commission has not been<br />
complied with by the TNEB till to-day and even the Review Petition filed by TNEB was<br />
dismissed by the Hon’ble Commission on 24.12.2008.<br />
Hence, the aspect of CUF needs to be reworked by considering the factors of problems<br />
in evacuation and also the problems of power crisis in the State. The proven statistics of<br />
generation of units by each capacity wind turbine were analyzed and it gives an average<br />
of 21% of PLF/CUF only. Hence, this needs to be revised from 27.15% to 21%.<br />
Further, the ideal locations have already been occupied by the older machines and the<br />
locations now available are not having the same rate of wind availability when compared<br />
with the earlier locations. The Plant Load Factor/Capacity Utilization Factor may not go<br />
beyond 20% for any reason whatsoever. Hence, on the aspect of wind availability also,<br />
the CUF needs to be lowered down.<br />
M/s.Indian Wind Energy Association:- In <strong>Tamil</strong> <strong>Nadu</strong>, the prominent wind sites have<br />
already been exhausted, leaving the wind sites which have weaker wind regime and<br />
requested the Hon’ble Commission to specify the Capacity Utilisation Factor after duly<br />
considering the actual CUF achieved by the wind projects commissioned after the<br />
issuance of May 15, 2006 <strong>Order</strong>.<br />
M/s.Indian Wind Turbine Manufacturers Association:- New wind projects in <strong>Tamil</strong><br />
<strong>Nadu</strong> will be in the balance class – II sites with low wind power density and hence lesser<br />
CUF shall be considered for tariff calculation.<br />
Power Engineers Society of <strong>Tamil</strong> <strong>Nadu</strong>:- CUF should be arrived with the data<br />
collected after 2002.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- The proposed CUF of 27.15% is acceptable.<br />
Ministry of New and Renewable Energy:- The CUF may not be as higher as was<br />
analyzed by the Commission while issuing the earlier order. Requested the Commission<br />
to specify the CUF after duly considering the actual CUF achieved by the wind projects<br />
commissioned after the issuance of order No.3 <strong>dated</strong> 15-05-2006.<br />
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10. DEEMED DEMAND CHARGES<br />
M/s.Indian Wind Power Association:- The CUF should not be multiplied by 0.65 which<br />
is a group / State phenomenon. The CUF should be taken as demand supplied by wind<br />
energy generators. Commission should allow 100% generation and maximum demand<br />
benefit to the consumers. Alternatively, the demand charges could be levied on net<br />
energy supplied by the distribution licensee based on actual generation data for each<br />
generator.<br />
M/s.SP Spinning Mills Pvt. Ltd.:- CUF should be only applied when the deemed<br />
demand is calculated on the installed capacity of the WEG. If the deemed demand is<br />
arrived on the basis of actual energy, CUF should not be applied as energy is already<br />
the result of applying the CUF on the capacity of the WEG.<br />
Many captive consumers are using almost 100% of the energy for their own use only.<br />
For such consumers the assumption of 65% adjustment for captive use and 35% sale to<br />
TNEB will not hold true for these individual consumers. This assumption will put these<br />
consumers at a heavy loss.<br />
M/s.Acciona Wind Energy Pvt. Ltd.:- The demand charges payable by the wind<br />
energy user should be directly proportional only to the balance of the energy needs they<br />
are sourcing from the STU/Distribution Licensee.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- At present 55% of energy generated is for generator’s<br />
use and 45% of energy generated is purchased by TNEB and accordingly deemed<br />
demand should be calculated.<br />
However, the deemed demand concept should be deleted since the demand charges<br />
are meant to recover the fixed charges incurred by the Board for creating required facility<br />
towards capacity and meeting the demand of the consumer requiring power.<br />
11. DEPRECIATION<br />
M/s.Acciona Wind Energy Pvt. Ltd.:- A residual value higher than 2% of the capital<br />
cost is not possible to be realized and the depreciation rate should be 4.9%.<br />
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M/s.Winwind Power Energy Private Limited:- Considering the residual value of WEG<br />
as zero at the end of 20 years and consequently, SLM depreciation rate of 5% should be<br />
adopted.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- The suggested depreciation rate of 4.5% is acceptable<br />
to TNEB.<br />
12. DE-RATING FACTOR<br />
M/s.Indian Wind Power Association:- The experience in running Wind Energy<br />
Generator has taught that the de-rating of the WEG be taken as 1/2 % (half percent) per<br />
year after 2 years.<br />
Thiru G.Ramakrishnan:- De-rating of CUF may be followed from 6 th year onwards as<br />
the generation is dependent upon the life of various critical components like gear box,<br />
roughness of the blade, life of electrical components due to constant switching<br />
operation, etc.<br />
M/s.Winwind Power Energy Private Limited:- De-rating of CUF should not be<br />
considered as an alternative to time value of money. Reduction in CUF and time value of<br />
money operates in parallel and both need to be provided for. Further, de-rating of CUF<br />
@1% does not even come close to sufficiently cover for the inflation as this de-rating<br />
starts only from the 10 th year.<br />
M/s.Indian Wind Turbine Manufacturers Association:- De-rating factor should be<br />
atleast 1% in every 5 year of project life.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- De-rating factor is not allowed in case of thermal<br />
stations and the electrical characteristic for all type generators is same. CUF is based on<br />
wind velocity and may vary from year to year. As such average over a running period of<br />
every 5 years may be considered for adoption.<br />
13. ENERGY PURCHASE AGREEMENT<br />
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M/s.Indian Wind Power Association:- The draft of the agreement should be discussed<br />
with the investors, who is also a signatory to the agreement and the benefits intended to<br />
be passed on to the investors should be available from the date of the order it self rather<br />
than linking it to the date of entering into a new agreement. Further, there could be an<br />
exit clause in the agreement after giving three months notice by either party and there<br />
should not be any penalty associated with it.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association:- The draft EPA as already proposed in<br />
order no.3 <strong>dated</strong> 15.05.2006 of the Hon’ble Commission was not made available to the<br />
comments of the stake holders and requested that more comments could be invited if<br />
the exact text of the EPA is made available to the stake holders.<br />
M/s.Acciona Wind Energy Pvt. Ltd.:- There need not be any penalty for terminating<br />
the PPA with the STU and /or Distribution Licensee provided a 3 months notice period is<br />
served by the WEGs. However, STU and/or the Distribution Licensee should not be<br />
allowed to terminate the PPA under any circumstances since there would be a negative<br />
outlook by the financial institutions providing the long term debt financing and thereby<br />
financing the wind power projects would become difficult.<br />
M/s.Winwind Power Energy Private Limited:- TNEB should not be allowed to break<br />
out of the PPA. Developer should be penalized for breaking out of PPA, unless the<br />
power generation is substantially reduced due to factors beyond control of developer.<br />
M/s.Indian Wind Turbine Manufacturers Association:- In case of a wind project, most<br />
of the cash outflows are there at the initial stages of project (Planning and construction).<br />
The possibility of winding up such a capital incentive project that too with high debt value<br />
does not arise except some extraordinary conditions. In view of the above, the clause for<br />
penalty is not required.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- If the WEGs winds up the operation before the expiry of<br />
the agreement period, 25% of the then prevailing purchase price for the balance<br />
agreement period based on the CUF adopted for working out the tariff may be imposed<br />
as penalty. In case of sale to other party, then the WEGs have to apply for open access<br />
and pay the associated charges.<br />
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A clause in the PPA should be included to break out of the PPA by either party after<br />
giving three months notice. The WEGs have to give 3 months notice well in advance and<br />
the Board prepares for the settlement. If the generator resorts to payment of penalty, a<br />
date may be fixed for disconnection of the WEGs. A disconnection certificate and no due<br />
certificate will be given to the generator and the agreement may be terminated.<br />
Similarly if the WEGs have not run for longer period, a time limit has to be set, so that<br />
the WEGs operation has to be commenced within this time frame. The Superintending<br />
Engineer concerned will issue the notice to this effect. If the WEGs has not started for<br />
longer periods beyond the period indicated in the notice, penalty has to be imposed and<br />
the 10% generation loss has to be paid.<br />
Indian Renewable Energy Development Agency Limited:- The period of PPA should<br />
cover at least the entire loan period.<br />
14. EVACUATION FACILITIES<br />
M/s.Indian Wind Power Association:- The wind sector in <strong>Tamil</strong> <strong>Nadu</strong> has suffered<br />
during the previous years for want of adequate evacuation infrastructure. There has<br />
been a loss of almost 30-40% of possible generation on this count alone. During the<br />
year 2008, evacuation infrastructure of M/s Power Grid Corporation of India Ltd., was<br />
used, which has been created to evacuate the power generated from the Koodankulam<br />
Nuclear Power Station. Once the Koodankulam Station starts generating to its capacity,<br />
this facility may not be available for evacuation of wind power. Commission may direct<br />
TNEB to create its own evacuation facility so that the 100% wind power can be<br />
evacuated in future. Further, creation of any additional infrastructure should take into<br />
account the future growth envisaged in the sector rather than confining to then present<br />
existing capacity.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association:- TNEB has not yet complied the order<br />
no.3 <strong>dated</strong> 15-05-2006 on the aspect of evacuation and requested each unit produced<br />
by wind generators should be evacuated without any exception.<br />
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M/s.Acciona Wind Energy Pvt. Ltd:- The STU/ Distribution Licensee should bear the<br />
cost of interfacing line till the interfacing point for the wind power projects irrespective of<br />
whether the wind farm investor sells the entire generated electricity to the distribution<br />
licensee or to 3 rd parties since the generator is contributing to reduce the huge energy<br />
deficit in the State.<br />
M/s.Indian Wind Turbine Manufacturers Association:- Commission may direct TNEB<br />
for submitting every year a time bound plan for system augmentation and grid<br />
strengthening based on the proposed wind sites. Further, the interconnection point is not<br />
defined in NCES Regulation. In practice, an interconnection point can be a line (LILO<br />
arrangement) or can be HV side (or LV side) of substation.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- In the absence of collection of IDC, it may not be<br />
possible for TNEB to provide the required evacuation on priority basis within the annual<br />
plan. In case collection of IDC is permitted, then TNEB may consider allotment of power<br />
transformer to the evacuation arrangement on priority basis from their general pool. The<br />
evacuation / transmission capacities created for wind power will be utilized partially and<br />
it may have to be examined as to whether such investments for such partial utilization<br />
could be affordable.<br />
15. ENERGY WHEELING AGREEMENT<br />
M/s.Indian Wind Power Association:- The benefits intended to be passed on to the<br />
investors should be available from the date of the order it self rather than linking it to the<br />
date of entering into a new agreement. Further, there could be an exit clause in the<br />
agreement after giving three months notice by either party and there should not be any<br />
penalty associated with it.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association:- The draft EWA should made available to<br />
the comments of the stake holders and more comments could be invited if the exact text<br />
of the EWA is made available to the stake holders.<br />
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M/s.Winwind Power Energy Private Limited, Chennai – 6:- EWA should be signed for<br />
5 year tenure with clause to extend the term with mutually agreed terms and the exit<br />
clause should be allowed with mutually agreeable terms, with reasonable notice period.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:-<br />
1. If the Captive generators have not complied the 26% ownership and 51%<br />
consumption. The action to be taken has to be included in the agreement.<br />
2. If the wheeling charges and scheduling & system operation charges are not paid<br />
for 2 months, wheeling may be discontinued.<br />
3. Agreement period may be 4 types 5, 10, 15 and 20 years.<br />
4. If there is no option for the generator except for the own consumption they will<br />
opt for longer period.<br />
5. If the generators find option for additional stake holder/third party they will<br />
terminate the short term agreement with compensation amount.<br />
6. After the third party agreement period is over, then they will come and execute<br />
the EWA as new entrant.<br />
7. Exit provisions may be given with some compensation<br />
8. Entire energy sale to Board, surplus sale to surplus banking and vice versa<br />
change in utility of wind energy may be considered after one year of the<br />
agreement executed.<br />
16. INSURANCE CHARGES<br />
M/s.Indian Wind Power Association:- Insurance premium needs to be worked out<br />
taking into account the replacement value and not just the depreciated value. Insurance<br />
charges could be fixed at a level of 0.75% of the replacement value in the first year and<br />
with a possible increase of 5% every year thereafter.<br />
M/s.Rogini Mills:- During the initial years no insurance company either nationalized or<br />
private are having proper machinery breakdown policies as far as Wind Turbine<br />
Generators are concerned. If generation stands stopped due to breakage, the credit<br />
benefit goes down to that extent.<br />
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<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- The proposed rate of insurance charges is acceptable<br />
to TNEB. However, the percentage to be applied for insurance calculation may be<br />
changed to the cost of the machinery instead of the capital cost of the projects.<br />
Indian Renewable Energy Development Agency Limited:- May be considered based<br />
on the market practices.<br />
17. INTEREST ON DEBT<br />
M/s.Indian Wind Power Association:- It is not always possible to obtain financial<br />
assistance from IREDA only. The present rate on term loan from the banking system for<br />
WEGs is in the range of 13-14% and Commission could consider an interest rate of<br />
13%.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association:- In actual practice, IREDA is not able to<br />
provide debts for all the WTG owners. All the WEG owners have to approach only<br />
commercial banks for the purpose of loan. Hence, the interest cost on debts may be<br />
raised and fixed as 14% on an average instead of 12%.<br />
M/s.Indian Wind Energy Association:- The Hon’ble Commission can specify the<br />
indexing mechanism by linking it with the long term Prime Lending Rate (PLR) of State<br />
Bank of India. The Commission can specify the interest rate 200 basis point higher than<br />
the SBI long term PLR due to higher risk perceived by the lenders.<br />
M/s.Sri Amaravathi Spinning Mills:- The interest rate of 12% on non renewable energy<br />
projects is not good enough to lure investors in such projects and this should be pegged<br />
at 5% per annum. Further, there should be subsidy from the Government if the interest<br />
rate exceeds 9% per annum.<br />
M/s.Winwind Power Energy Private Limited:- The cost of debt incurred by an average<br />
investor in majority of the cases should be taken and only a small proportion of investors<br />
avail loan from IREDA and a major debt funding comes from various nationalized and<br />
private sector banks. IREDA provides funding at a discounted rate, which is not the case<br />
with other financing institutions.<br />
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Therefore considering the PLRs of various banks and a premium of 50 basis points<br />
should be applied on average PLR for wind power project funding which is worked out to<br />
13.50%. Further the term of loan offered by IREDA is not the industry benchmark and<br />
banks do not provide loans for such a higher term. Therefore term of loan should be<br />
taken at 5 years, with one year moratorium.<br />
M/s.Indian Wind Turbine Manufacturers Association:- The interest rate should be<br />
minimum of 13% and the term of loan should be 7 years.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- Reserve Bank of India has taken efforts to reduce the<br />
interest rate charged by the financial institutions. The rate of interest rate offered to the<br />
NCES sources should be less than the market rate prevailing from time to time. Hence,<br />
the suggested rate of 12% is not acceptable and interest rate of 9% to 10% may be<br />
considered. Further, increasing the loan tenure to 15 years can be considered.<br />
Ministry of New and Renewable Energy:- Commission can specify the suitable<br />
mechanism that could automatically address the issue of variation in interest rate in<br />
future and requirement of review of tariff order should not arise.<br />
18. INTRODUCING COMPETITIVE BIDDING<br />
M/s.Indian Wind Power Association:- Time is not ripe enough for introducing<br />
competitive bidding even from the same type of non-conventional source. There is a risk<br />
of formation of a cartel and the price at which the generated power could be offered and<br />
could be much higher than the cost plus method.<br />
Thiru G.Ramakrishnan:- Most of the WEGs are erected by small and medium industrial<br />
developers in small capacities and the competitive bidding will not help them or the<br />
licensee to get competitive tariff.<br />
M/s.Rogini Mills. :- NCES can not compete with conventional sources in terms of cost<br />
of electricity and it may take some more time. Hence, wind energy procurement is to be<br />
made at preferential tariff.<br />
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M/s.Winwind Power Energy Private Limited:- In the present market scenario, buyer of<br />
power would opt for the cheapest source and at present wind power will not be able to<br />
compete in market with other conventional sources. Therefore, market determined<br />
pricing should not be adopted for wind power projects.<br />
M/s.Indian Wind Turbine Manufacturers Association:- International experience of<br />
competitive bidding based procurement of renewable energy has not yielded favourable<br />
results in the past. Further, the experience of competitive bidding based procurement is<br />
not yet adequately established even in case of conventional technologies in the country<br />
with many power projects awarded through competitive bidding yet to be commissioned.<br />
In view of the above, power procurement through competitive bidding route may not be<br />
an appropriate mechanism for promotion of renewable energy sources atleast at this<br />
stage.<br />
Power Engineers Society of <strong>Tamil</strong> <strong>Nadu</strong>:- Bidding is the better process. Cost plus<br />
principle should be dropped.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- Market determined pricing is not desirable now and<br />
may lead to a sort of lopsidedness in approach. Hence the regulatory price should be<br />
continued till the power position improves and a surplus situation prevails.<br />
19. METERING AND COMMUNICATION<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association:- As per the regulation 8 (1) and (9) of the<br />
<strong>Electricity</strong> Supply Code, 2004, it is the obligation of TNEB to provide a meter card at the<br />
wind mill site, with the parallel one of the meter card maintained by TNEB, but in actual<br />
practice, no such arrangement has been made available at the wind mill site.<br />
Commission can order TNEB to provide meter card to the WEGs.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- WEGs are also brought under the umbrella of<br />
Availability Based Tariff mechanism and the Commission may examine this proposal<br />
and order accordingly.<br />
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20. MINIMUM PURCHASE REQUIREMENT<br />
M/s.Indian Wind Power Association:- Commission could fix 15% as minimum<br />
percentage of power to be procured from renewable sources of energy out of the total<br />
consumption of electricity with the provision that the entire energy produced from<br />
renewable sources should be accepted. There is no need for fixing source wise quota.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association:- Minimum purchase requirement should<br />
not include the captive consumption or third party sale of wind energy. Captive<br />
consumption is for a separate purpose and therefore, it cannot fall under Section 86(1)<br />
(e) of The <strong>Electricity</strong> Act, 2003, which specifically deals with the purchase alone and not<br />
with the captive consumption. Barring the captive consumption percentage, the Hon’ble<br />
Commission may retain or increase the 10% exclusively for sale/purchase category<br />
alone and even by barring the third party sale if any.<br />
M/s.Indian Wind Energy Association:- National Tariff Policy stipulates that the<br />
appropriate Commission to specify ‘minimum percentage’ for power purchase from<br />
renewable energy sources only. In view of the above, Hon’ble Commission to specify<br />
only minimum percentage for power purchase from renewable energy sources.<br />
Although wind energy is leading the front compared to other renewable energy sources<br />
in the country, the others would also catch-up in the subsequent years (viz. biomass,<br />
Bagasse-cogeneration & small-hydro has a PLF ranging from 35% to as high as 80%).<br />
Therefore, no restrictions in terms of internal percentages amongst RE is desirable,<br />
rather it is requested that the Hon’ble Commission should leave it to the market<br />
conditions to decide so.<br />
Hon’ble Commission should not make downward revision in minimum purchase<br />
specification and the minimum purchase specification of 10% should be continued<br />
during the next control period. Requested the Hon’ble Commission to extend the<br />
applicability of ‘minimum percentage’ specification for renewable energy procurement to<br />
‘open access consumers’ and ‘captive consumers’ apart from distribution licensees, to<br />
the extent of the consumption outsourced from such sources.<br />
Further, it may be worthwhile to look at an alternate approach of Renewable Purchase<br />
Obligation (RPO) implementation through ‘Renewable Energy Certificate’ (RE<br />
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Certificate) method for compliance, as against the currently operational ‘contract path<br />
method’. The same method would also be very beneficial, should there emerge a unified<br />
electricity market across the country in the coming years. Further, the RE certificate<br />
system would have a component of ‘price discovery’ of RE based energy, and hence,<br />
possible to move towards market determined pricing mechanism.<br />
M/s.Acciona Wind Energy Pvt. Ltd.:- Minimum purchase requirement by the<br />
Distribution Licensee should be 10% and the purchase should relate to the total of all<br />
NCES power put together rather than being split category wise.<br />
M/s.Winwind Power Energy Private Limited:- It is important to fix a minimum<br />
purchase requirement for NCES, as well as for wind power to attain at a right energy mix<br />
and at the same time, it is also true that penetration of wind power beyond a certain limit<br />
may affect the grid stability.<br />
Hence, both minimum and maximum limits should be prescribed for sourcing energy<br />
from wind power. At present, wind power contributes approximately 10% of the total<br />
electricity consumption of the State. In order to promote further investment, the minimum<br />
purchase requirement for wind power should be at 12.50%.<br />
M/s.Indian Wind Turbine Manufacturers Association:- 15% minimum purchase<br />
obligation will solve the purpose and will boost the capacity addition sufficiently.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- Minimum off take to be specified by the Hon’ble<br />
Commission should be inclusive of the wheeled energy as also from other NCES<br />
sources like Co-gen, Biomass, small hydro, solar, etc. Existing ceiling of 10% may be<br />
retained for the current control period also and absorbing the excess energy above 10%<br />
has to be left to the discretion of the TNEB. While minimum percentage is fixed on<br />
quantum of wind energy maximum percentage (around 30%) on installed capacity is to<br />
be fixed in order to facilitate grid management.<br />
In any power supply management system, the penetration of infirm power cannot be<br />
more than 10 to 12%. It may have to be examined as to how the additional wind energy<br />
89
generation is going to be helpful and to what extent. No distribution arrangements could<br />
be established based on the 40% supply of an infirm and uncertain power.<br />
Indian Renewable Energy Development Agency Limited:- Wind power should be<br />
utilized to the maximum possible extent since it is based on the natural resources.<br />
Ministry of New and Renewable Energy:- Principles adopted by the FOR working<br />
group may be considered on the issue of maximum/minimum purchase specification.<br />
21. OPERATION AND MAINTENANCE EXPENSES<br />
M/s.Indian Wind Power Association:- O&M expenses considered by the Hon’ble<br />
Commission during the previous order were based on the position obtained in the year<br />
2006. However, more than two and a half years have since passed and these expenses<br />
have almost doubled since then. Therefore, assuming the same level as fixed by the<br />
Commission in May 2006 may not be appropriate, considering the escalation in prices of<br />
almost all the parts. Hence, O&M expenses could be fixed at 1.8% of the capital cost for<br />
the first five years and escalation of 5% every year thereafter.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association:- For a machine of 1.25 MW, the capital<br />
cost has come earlier to Rs.5.91 Crores. For such a machine of this capacity, the<br />
manufacturer charges Rs.10 lacs as annual O & M charges. This comes close to<br />
1.69% and therefore, considering the revised capital cost now enhanced, the O & M<br />
charges should be fixed at the rate of 1.70% at least. Even though, the insurance<br />
charges are fixed as 0.5%, the wind turbine owners are supposed to take additional<br />
insurance policies besides break down policies, etc. Hence, this cannot be a criterion to<br />
lower the O & M cost.<br />
M/s.Indian Wind Energy Association:- There has been significant increase in<br />
Consumer Price Index (CPI) and Wholesale Price Index (WPI) on year-on-year basis<br />
and the CAGR corresponds to around 5%. Therefore, Hon’ble Commission may kindly<br />
consider the O&M Cost for first year as 1.1% of the Project Cost with annual escalation<br />
of 5% for tariff determination from second year onwards.<br />
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M/s.Sri Amaravathi Spinning Mills:- O&M charges of 1.1% for the first 5 years should<br />
be made applicable to the existing WEGs also.<br />
Thiru G.Ramakrishnan:- Normally no O&M charge is collected in the first year when<br />
the WEG is under warranty period. Hence, the O&M charge may be collected from<br />
second year and the same may be increased at 5% from third year onwards as per<br />
CERC norms applicable to thermal and hydro generating stations.<br />
M/s.Acciona Wind Energy Pvt. Ltd:- The actual O&M cost is atleast 2% of the capital<br />
cost with an escalation of 5% every year. Provision of 5% of the capital cost needs to be<br />
made every 5 years towards replacement and / or repair of large components.<br />
M/s.Winwind Power Energy Private Limited, Chennai – 6:- The prevailing rates<br />
should be considered in working out the O&M expenses and suggested to adopt Rs.12<br />
Lakhs per annum per MW towards O&M expenses. Further the escalation of 5% should<br />
start from the second year itself.<br />
M/s.Indian Wind Turbine Manufacturers Association:- There should be an escalation<br />
of 5% every year on account of inflation.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- The O&M charges of 1.1% of the capital cost exclusive<br />
of insurance charges is acceptable. However, the percentage to be applied for O&M<br />
calculation may be changed to the cost of the machinery instead of the capital cost of<br />
the projects.<br />
22. PAYMENT OF SECURITY DEPOSIT TO TNEB<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association:- Payment of Security Deposit may be in<br />
accordance with the earlier order or it could be changed as the average of two times of<br />
the net energy consumed after adjustment of wind energy.<br />
M/s.Acciona Wind Energy Pvt. Ltd.:- Security deposit period norm should not be<br />
changed to one calendar year.<br />
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<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- Security deposit at two times the net energy supplied<br />
during the year by the distribution licensee may be considered.<br />
23. PAYMENT OF SECURITY TO THE WEGS<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association:- Even though, the earlier <strong>Order</strong> No.3<br />
<strong>dated</strong> 15.05.2006 specifically provides enough scope on this aspect, nothing was<br />
materialized till to-day. However, the same can be reiterated with a specific time bound<br />
action plan.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- The bankable security in favour of the generator need<br />
not be insisted and this may be deleted since in case of any encashment of the back up<br />
LC by the WEGs, it will affect the image of the TNEB among the bankers.<br />
24. PREFERENTIAL TARIFF DETERMINATION<br />
M/s.Indian Wind Energy Association:- Power procurement through competitive<br />
bidding route may not be appropriate mechanism for promotion of renewable energy<br />
sources. Besides, unless Guidelines for Competitive Bidding for renewable sources are<br />
notified by Central Government, the mechanism of ‘preferential tariff’ determination will<br />
have to continue.<br />
M/s.Winwind Power Energy Private Limited:- In view of the short term support<br />
required by the industry and a strong energy support for the nation (as in Brazil), it will<br />
go a long way to keep preferential tariff for wind power for coming few years.<br />
M/s.Indian Wind Turbine Manufacturers Association:- Wind energy developers do<br />
not get preferential tariff as in the case of thermal power stations where everything like<br />
escalation in O&M, inflation, interest rates, etc. are being passed on to the consumers.<br />
There is no mechanism till this date which saves investor from the risk of variation of<br />
wind and hence the investor should be provided with guaranteed returns.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- Tariff determination based on competitive bidding is<br />
neither desirable nor justifiable since wind power is infirm power.<br />
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Indian Renewable Energy Development Agency Limited:- Since the capital cost and<br />
cost of generation for WEGs are not competitive with the conventional generation plants,<br />
energy procurement should be done at preferential tariffs to encourage higher<br />
generation of wind power.<br />
Ministry of New and Renewable Energy:- Power procurement through competitive<br />
bidding route may not be appropriate mechanism for promotion of renewable energy<br />
sources at this stage. Besides, unless guidelines for competitive bidding for renewable<br />
sources are notified by Central Government, the mechanism of preferential tariff<br />
determination may be continued.<br />
25. REACTIVE POWER CHARGES<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association:- Reactive power charges already fixed<br />
are little high and may be reduced to 10 paise/20 paise from 25 paise/50 paise.<br />
M/s.Sri Amaravathi Spinning Mills:- Reactive power charges can be reduced from 25<br />
and 50 paise/KVARh to 10 and 25 paise/KVARh respectively.<br />
M/s.Acciona Wind Energy Pvt. Ltd.:- Existing reactive energy charges should be<br />
reduced in line with the other States.<br />
M/s.Winwind Power Energy Private Limited:- Agreed with the reactive power charges<br />
proposed in this Consultative Paper in the best interest of the industry.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- Proposal indicated in the consultative paper should be<br />
continued.<br />
26. RESTRICTIONS ON SERVICE CATEGORY FOR CAPTIVE USE/THIRD PARTY<br />
SALE<br />
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M/s.Indian Wind Power Association:- Captive use of wind energy should be permitted<br />
for LT consumers also. This has become more relevant in the current context of the<br />
power crisis being faced in the State. As the gestation period for wind power project<br />
being small when compared with conventional power projects, it would not only result in<br />
increased capacity but would also ease the pressure on the TNEB to certain extent.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association:- Captive user has to be preferentially<br />
treated when compared with the third party seller and both can not be treated equally.<br />
M/s.Acciona Wind Energy Pvt. Ltd:- WEGs should be allowed to adjust unit to unit for<br />
captive uses / third party sale in LT services also along with HT services and the due<br />
monitoring, accounting and billing system should be developed jointly by TNEB and<br />
SLDC.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- LTOA/third party sale to LT services should not be<br />
allowed. Adjustment of any HT services may be accepted, but for the adjustment with<br />
commercial services, the coincident compensation charges may be given.<br />
Indian Renewable Energy Development Agency Limited:- The facilities on extending<br />
captive use/third party sale to LT services should be considered after the present<br />
accounting facilities available with TNEB/SLDC are enhanced to account for the same.<br />
27. RETURN ON EQUITY (ROE)<br />
M/s.Indian Wind Energy Association:- RoE of 14% on post-tax basis does not really<br />
accord preferential treatment to renewable energy, enunciated in National Tariff Policy,<br />
as the RoE for conventional generation projects also stands at 14% on post-tax basis.<br />
Therefore InWEA requested the Hon’ble Commission to fix the Return on Equity of 16%<br />
on post-tax basis for promoting the investments in wind sector.<br />
M/s.Winwind Power Energy Private Limited:- In the present scenario, post tax returns<br />
of 14% will not attract customers to enter into a non-conventional area. Investor should<br />
get post tax returns at least 2% above the cost of funds. Considering average cost of<br />
funds at 13.5%, the returns should be considered at 15.5% post tax. A benefit of tax<br />
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waiver for 10 years is available under Section 80IA of Income Tax Act, pre tax returns<br />
need not be calculated with current rate of income tax. Considering an average rate of<br />
22.17% tax on profits, pre tax returns of 19.73% needs to be taken.<br />
M/s.Indian Wind Turbine Manufacturers Association:- RoE should be 16% (Post-<br />
Tax) for preferential tariff.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- Allowing pre tax return to WEGs does not appear<br />
correct since the WEGs are allowed to setoff losses in other industry towards<br />
accelerated depreciation.<br />
28. SCHEDULING AND SYSTEM OPERATION CHARGES<br />
M/s.Indian Wind Power Association:- Hon’ble Commission may waive the scheduling<br />
and system operation charges being levied on the power being generated from<br />
renewable energy sources as a promotional measure. This will pave the way for larger<br />
investments into the sector or make such charges zero for renewable energy.<br />
29. TARIFF MECHANISM<br />
M/s.Indian Wind Energy Association:- Commission may follow generalized approach<br />
for tariff determination since Project Specific Tariff may give a scope for the utilities to<br />
sign PPAs on priority basis with those Wind developers of larger project size who have<br />
approved tariff on cost plus ‘Project Specific’ basis. Besides distorting the market, this<br />
would lead to unnecessary confusion and risk among small potential investors.<br />
Thiru S.Kittu, Goodwill apparels, Tiruppur:- Tariff of Rs.3.40 per unit should be given<br />
to all existing WEGs also. Further, a special incentive should be provided for the existing<br />
old machines due to their old technology and the productivity of the old machines can<br />
not be compared with the new ones.<br />
M/s.Winwind Power Energy Private Limited:- Generalized tariff should be fixed for<br />
WEGs and project specific tariff orders can be considered for large wind farms. The<br />
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procedure to get specific tariff orders need to be looked into and may be modified to<br />
make them faster and smoother.<br />
M/s.Super Wind Project Private Limited and M/s.Simran Wind Project Private<br />
Limited:- Commission may consider determining the generating Company specific order<br />
with a minimum installed capacity of 200-250 MW.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- Commission’s view of issuing a generalized tariff order<br />
for WEGs is acceptable. Further TNEB welcomed the cost plus tariff determination.<br />
However the capital cost employed should be checked with present cost of machines in<br />
order to have reasonable tariff and to pass on the benefit to the end consumers. Tariff<br />
for wind can only be single part. Suggestion of the Commission that levelised tariff be<br />
worked out duly allowing de-rating of the capacity and escalation of O&M expenses is<br />
acceptable. The tax benefits due to accelerated rate of depreciation in the initial years<br />
may also be factored while determining the tariff. In a cost plus approach fixing a base<br />
tariff and allowing escalation every year on this is not allowed. Hence base tariff with<br />
escalation approach is not acceptable.<br />
Indian Renewable Energy Development Agency Limited:- The operating cost is<br />
increasing year by year and the performance of the WEGs also gets de-rated, thereby<br />
resulting in lower realization of revenue and there should be annual escalation in tariff,<br />
as has been done in Maharashtra and Rajasthan.<br />
Ministry of New and Renewable Energy:- Commission may adopt a generalized<br />
approach for tariff determination on cost plus basis.<br />
30. TARIFF RATE<br />
M/s.Indian Wind Power Association:- Thanked the commission for coming up to a<br />
level of Rs.3.40. Commission may rework the tariff based on the above suggestions and<br />
reiterated their earlier request during the round-table conference held at Chennai on July<br />
16, 2008 for revising the tariff to Rs.3.90 per unit with 9 paise annual escalation for 20<br />
years. The tariff proposed in the consultative paper will not even cover the interest cost<br />
which works out to Rs.3.90 per unit.<br />
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Commission may revise the tariff for group 1 and 2 WEGs in consonance with the tariff<br />
now being proposed, as there is no difference in the quality of power being produced<br />
from these and future WEGs. Thus, with the quality of power being the same, fixing<br />
different tariff for different WEGs on the basis of date of commissioning is contrary to<br />
and denying equality before law. Commission should fix the same tariff for all WEGs<br />
from the date new rates come into force for WEGs to be installed.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association:- The various parameters needs to be<br />
revised wherever necessary, particularly on items like, CUF, Capital cost, interest on<br />
loan, return on equity, O & M charges, etc. and accordingly all older machines<br />
commissioned prior to 15.05.2006 and after 15.05.2006 should also be taken care on<br />
the reworking of the purchase price. Further, the return on equity is a factor to be<br />
determined only on the units generated, it needs to be reworked based on the actual<br />
PLF/CUF based on the fact of grid availability, exhaust of ideal locations and also the<br />
problem of power crisis. When the Koodangulam units start generation, the dedicated<br />
lines provided for the transmission of energy, may not be available to the WTGs willing<br />
to transmit their energy through the said line, to the destination of their use.<br />
M/s.Rogini Mills:- The tariff rate shall be escalated every year for 20 years as has been<br />
done in Maharshtra.<br />
M/s.Acciona Wind Energy Pvt. Ltd.:- The tariff rate should be of Rs.3.40 /kWh with<br />
annual escalation of 1.75% each year or Rs.4 / kWh fixed for 20 years.<br />
M/s.Winwind Power Energy Private Limited, Chennai – 6:- Tariff rate shall be of<br />
Rs.4.60 per kWh with 2.5% escalation every year.<br />
M/s.Arvinth Hospital, Namakkal – 1:- The new rate of purchase should be uniform<br />
irrespective of the date of commissioning of the WEGs particularly for those services<br />
which supply power to TNEB.<br />
M/s.Vairam Wind Power, Namakkal:- The new rate of purchase (Rs.3.40 per unit)<br />
should be uniform irrespective of the date of commissioning of the WEGs.<br />
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M/s.Indian Wind Turbine Manufacturers Association:- Base tariff may be arrived<br />
taking into account the existing financial parameters and escalating it every year as<br />
prescribed by the Maharashtra <strong>Electricity</strong> <strong>Regulatory</strong> Commission.<br />
Power Engineers Society of <strong>Tamil</strong> <strong>Nadu</strong>:- The price of Rs.2.20 per unit being<br />
equivalent to gas power station is reasonable as procurement price.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- The policy directives of GoTN such as provisions of<br />
power security to weaker sections and agricultural sectors shall also be kept in view in<br />
tariff determination process. Further, the existing tariff for group 1 and group 2 WEGs is<br />
hold good and for the new WEGs, a tariff rate of Rs.3 / unit will hold good duly freezing<br />
the various parameters as suggested by TNEB. Levelised tariff is preferred than the<br />
average tariff to avoid future litigation on this issue.<br />
31. TIME VALUE OF MONEY<br />
M/s.Indian Wind Power Association:- When tariff is being fixed for a period of twenty<br />
long years, the purchasing power of rupee would have eroded substantially when the<br />
inflation in our country has been in the range of 6 to 12%. Time value of money needs to<br />
be factored in while arriving at the uniform tariff for a period of 20 years. Alternatively,<br />
the Maharashtra model of an annual escalation in tariff could be announced with 9 paise<br />
per year escalation which would take care of the erosion in the purchasing power.<br />
M/s.Indian Wind Energy Association:- Hon’ble Commission should specify the tariff<br />
after considering the time value of money and actual cash flow requirement of the<br />
developer in initial years, either by way of specifying the front loaded declining tariff or<br />
levellised tariff for 20 years of project life. Commission may differential tariffs for existing<br />
projects and new projects, keeping in mind the benefits available to the two sets of<br />
projects and the prevailing market conditions.<br />
M/s.Winwind Power Energy Private Limited:- Tariff should be progressive reflecting<br />
the growth in economy and corresponding prices and the concept of time value of<br />
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money should be followed in the tariff determination. Rs. 3.74 per unit would be the right<br />
metric.<br />
32. WHEELING CHARGES<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- The transmission, wheeling charges and losses in kind<br />
fixed by the Commission in order No.3 is very meager at 5% of the energy which will not<br />
cover the losses approved by the Commission in the order No.2. The actual loss arisen<br />
by stepping up the 11KV to 110 KV and step down from 110 KV to 11 KV is around 22%.<br />
Hence, not withstanding the collection of the IDC amount, the transmission charges<br />
have to be fixed separately in Rupees per MW per day basis and the wheeling charges<br />
shall be enhanced from 5% to 15% separately.<br />
Power Engineers Society of <strong>Tamil</strong> <strong>Nadu</strong>:- As the capital cost is heavy, the open<br />
access charges shall be made same for all.<br />
33. WORKING CAPITAL REQUIREMENT<br />
M/s.Indian Wind Energy Association:- Commission has not considered the working<br />
capital requirement but the wind project requires working capital in the form of operation<br />
and maintenance expenses and receivables for running their routine business activities.<br />
Further, Karnataka and Rajasthan ERCs have considered the working capital<br />
requirement in wind tariff calculation. Therefore, Commission may consider the Interest<br />
on Working Capital at the interest rate equivalent to State Bank of India, and the working<br />
capital requirement equivalent to one month of O&M expenses and one and half months<br />
receivables, for determination of tariff for wind energy projects.<br />
34. OTHER ISSUES<br />
M/s.Indian Wind Power Association:- Even though the Commission revised the Open<br />
Access Regulations by reducing the open access application fee, open access<br />
registration fee and the scheduling and system operation charges, TNEB is yet to<br />
implement these changes. The investors who have invested in wind electric generators<br />
for the purpose of selling the power generated to TNEB have not been receiving the<br />
99
payments on time. These factors have affected the morale of the investors and they<br />
have lost their confidence in investing in <strong>Tamil</strong> <strong>Nadu</strong>.<br />
M/s.Sugavaneswara Spinning Mills Private Limited:- <strong>Tamil</strong> <strong>Nadu</strong> is now witnessing a<br />
acute shortage of power and the same will be continued for few more years. Hence it is<br />
necessary to encourage installation of more WEGs in this State and full support should<br />
be provided to get maximum benefits.<br />
M/s.Rogini Mills:- TNEB has frequently and orally asked the WEGs to shut down their<br />
turbines for periods ranging from 9 hours to 20 hours a day during the season of six<br />
months in a year. Because of the shutdown during the peak period, even though wind is<br />
fully available the WEGs are not able to generate power.<br />
There is no clause in the EPA for claiming compensation for shut down the turbines. Due<br />
to the introduction of slot to slot adjustment, the WEGs are not able to fully utilize the<br />
energy and lots of units are getting lapsed when the banking facility is closed. Even then<br />
banking charges are unforgettably charged by the Board.<br />
Thiru Singhan Ragu:- Possibility of providing huge capacity off shore wind farm may be<br />
explored and encouraged to derive benefit by way of economy of scale, efficiency in<br />
operation, reduction in capital and operational expenditure and to facilitate<br />
implementation of competitive tariff bidding in the long run.<br />
M/s.Acciona Wind Energy Pvt. Ltd:- Charges for Transmission, Wheeling and line<br />
losses charges should be reduced to 4% in line with other States to promote NCES<br />
generation.<br />
Power Engineers Society of <strong>Tamil</strong> <strong>Nadu</strong>:- <strong>Tamil</strong> <strong>Nadu</strong> grid can not accommodate any<br />
infirm generation. Promoting wind energy has lost its relevance in this State.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board:- Commission has issued order no.3 <strong>dated</strong> 15-05-2006 in<br />
suo motto without framing any regulation. One of the reasons for decline in capacity<br />
addition in wind generators in <strong>Tamil</strong> <strong>Nadu</strong> is the increased cost of the wind mill. Further<br />
the GOI has announced technological Upgradation funds to the textile mills and the<br />
100
funds were utilized in the wind sector. As these funds were stopped, the capacity<br />
additions during 2006-07 have also been reduced.<br />
Further, the reason for decline in capacity addition during 2007-08 is due to lack of<br />
evacuation facilities and not because of the unattractive tariff. But the evacuation<br />
problems have been sorted out now. The Commission had started encouraging the<br />
NCES power at the cost of TNEB and is not acceptable. The Commission has to give<br />
some compensation to the Central and State governments.<br />
List of persons/organizations<br />
1 Indian Renewable Energy Development Agency Limited:-<br />
2 M/s.Acciona Wind Energy Pvt. Ltd., Bangalaore<br />
3 M/s.Arvinth Hospital, Namakkal – 1:-<br />
4 M/s.Indian Wind Energy Association:-<br />
5 M/s.Indian Wind Power Association<br />
6 M/s.Indian Wind Turbine Manufacturers Association:-<br />
7 M/s.Rogini Mills:-<br />
8 M/s.Simran Wind Project Private Limited<br />
9 M/s.SP Spinning Mills Pvt. Ltd.:-<br />
10 M/s.Sri Amaravathi Spinning Mills, Karur:-<br />
11 M/s.Sugavaneswara Spinning Mills Private Limited:-<br />
12 M/s.Super Wind Project Private Limited<br />
13 M/s.<strong>Tamil</strong>nadu Spinning Mills Association:-<br />
14 M/s.Vairam Wind Power, Namakkal:-<br />
15 M/s.Winwind Power Energy Private Limited, Chennai:-<br />
16 Ministry of New and Renewable Energy:-<br />
17 Power Engineers Society of <strong>Tamil</strong> <strong>Nadu</strong><br />
18 <strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board<br />
19 Thiru G.Ramakrishnan, Retired Chief Engineer/TNEB<br />
20 Thiru S.Kittu, Goodwill apparels, Tiruppur:- T<br />
21 Thiru Singhan Ragu, Ooty:-<br />
101
Annexure – III<br />
PROCEEDINGS OF THE EXPERT COMMITTEE MEETING ON NON-<br />
CONVENTIONAL ENERGY SOURCES HELD ON 16-07-2008 (WIND<br />
ENERGY)<br />
102
Annexure – III<br />
Proceedings of the Expert Committee meeting on Non-Conventional Energy<br />
Sources held on 16-07-2008 (Wind energy)<br />
Mr. Kasthuri Rangaiyan, VP, Indian Wind Power Association:<br />
- The maintenance cost has increased by 25%, interest rate increased from 8% to<br />
13% / 14% as pointed out by Indian Renewable Energy Development Agency<br />
(IREDA).<br />
- Even IREDA rate is 12%. Hence a revision on this is required. The time value of<br />
money has to be taken, because the purchasing power of rupee is going down<br />
drastically.<br />
- Even in the competitive bidding by public sector and private sector entity reveals<br />
that capital cost has increased beyond Rs. 5.5 Cr./MW to Rs. 6 or 6.2 Cr. / MW.<br />
For the last year, it was Rs.5.75 Cr. / MW. Revised control period, with indexing<br />
mechanism is suggested.<br />
- The escalation is due to increase in steel price, cement price, etc. Indexing<br />
through cement price index or steel price index or electricity load index or a<br />
combination of these three.<br />
- In the first year of 577 MW was added while in the 2 nd year of control period less<br />
than 250 MW only has been added which is clear reflection of the cost increase<br />
during the control period. For the next year of control period, apart from revising<br />
the cost we should have some escalation indexing mechanism. This can be<br />
considered by the Commission for the coming period.<br />
- National Tariff Policy & Commission order speaking about preferential tariff, the<br />
Commission has given 16% return on pretax in the last control period. This<br />
works out to around 14% post tax. When compared with conventional generation<br />
having 14% post tax, this 16% pre tax for NCES is not a preferential tariff.<br />
- The suggestion with preferential treatment would be around 16% post tax. We<br />
request the Commission to consider capital cost, interest rate, indexing and<br />
higher return.<br />
103
Mr. A.H. Pandit, Consultant, Indian Wind Energy Association:<br />
- Average capital cost is around 5.57 Crs.<br />
- Indexing mechanism for capital cost during the control period<br />
- ROE of 16% pretax is less than 14% of post tax. Therefore ther is no preferential<br />
treatment for NCES power.<br />
- 16% of post tax ROE is recommended for NCES power.<br />
Mr. K. Venkatachalam, Chief Advisor, <strong>Tamil</strong> <strong>Nadu</strong> Spinning Mills Association<br />
- Firstly the generation tax of Rs.1000/- levied by GoTN has not been taken into<br />
account in the working calculating Rs.2.75 or 2.90. This should be added.<br />
- Secondly, the O & M cost assumption of 1% is less while the actuals is around<br />
1.8% or 1.9%. The actual O & M cost should be taken into account.<br />
- Because of the frequent power cuts, the wind mill generators are unable to<br />
wheel their generated energy.<br />
- We have invested so much of our energy, but we are not able to consume / use<br />
our generated energy and our energy is being diverted to other industries by<br />
TNEB.<br />
Mr.P.Vetrivelan, M/s. Sri Shanmugavel Mills:<br />
- Generated energy could not be utilized at user end due to load shedding of<br />
TNEB.<br />
- Due to inflation and raise in the lubricant cost O&M cost increased from 1.1% to<br />
1.8%<br />
- As against Rs. 3.50 we get an effective rate of Rs.2.50 only<br />
- Spares are not available in the field for substation maintenance by TNEB.<br />
- Due to poor frequency of grid 7% generation is lost<br />
Mr.Jayachandran, M/s.Premier Mills, Coimbatore:<br />
- The TNEB’s rate of Rs.3.81 is the effective rate.<br />
- When it is lapsed we get only around Rs.2.00 per unit<br />
- As of March 2007, we lost some units due to load shedding by TNEB.<br />
104
Mr.Ramesh Kymal, M/s.Vestas:<br />
- All input costs have increased in the last 4 to 5 months.<br />
- When you look at <strong>Tamil</strong> <strong>Nadu</strong> market, captive users are the maximum investors<br />
in the last 4-5 years. But the real way forward is the Independent Power<br />
Producers. That is how it is, the world over. Some how, investors shy off to<br />
come to <strong>Tamil</strong> <strong>Nadu</strong> mainly because we are not able to give them expected ROI.<br />
- At Rs. 2.90, the ROI is just 3%. If you can assure 12% to 14% IRR, I can assure<br />
you billions of dollars can come to <strong>Tamil</strong> <strong>Nadu</strong>. It is the ideal location because<br />
wind is steady, its a flat terrain, its ideal for wind power generation.<br />
- We have worked out a basic tariff of Rs.3.40 (a basic minimum) with an<br />
escalation also because every cash flow that we make, the variables are there.<br />
Because if you want foreign investors or other big investors to come in, they are<br />
looking for some kind of insulation for the inflation that will come in future.<br />
- I have been corrected that at Rs. 3.90, IRR is 13.2% because interest rates have<br />
gone up which can be substantiated.<br />
Mr. Ramani, M/s. Indian Wind Turbine Manufacturers Association<br />
- Capital cost has been increased and interest rates have gone up which is not<br />
controllable.<br />
- The tariff rate is Rs.3.40 in Karnataka and Rs.3.15 in Maharashtra.<br />
- Last year Gujarat has grabbed around 650 MW whereas in <strong>Tamil</strong> <strong>Nadu</strong> it<br />
continued to be around 300MW to 350 MW. With better tariff and better working<br />
conditions we could do better.<br />
- We talked about cost, inflation, interest rate, etc. for today. We have to factor<br />
that also into tariff fixation. It has to be averaged for the coming 3 years.<br />
- Another point is the waiver of the infrastructure development charges which may<br />
increase productivity and optimisation of the industry itself.<br />
- It is not that <strong>Tamil</strong> <strong>Nadu</strong> is bad but other states are more favourable.<br />
- If operational charges, instead of reducing from Rs.1000 to Rs.350, if it is<br />
reduced to zero, it will help the existing customers to come forward to make more<br />
investment in <strong>Tamil</strong> <strong>Nadu</strong>.<br />
- In the last 4 years, it has come down from 865MW to 350 MW. Every year it has<br />
come down and not increased.<br />
105
- The tariff/ PPA is only for 20 years. For this, the Commission can add a clause<br />
that even after 20years, wherever the wind mills are in condition to continue<br />
generation, the TNEB can continue the PPA since we do not know the fate of<br />
wind farm after 20 years.<br />
Mr.Rajendra V.Kharul, Head, Centre for Wind Power, WORLD INSTITUTE OF<br />
SUSTAINABLE ENERGY(WISE), Pune:<br />
- Steel and cement cost have increased by 20%<br />
- Inflation at 12% and interest rates at 13% to 14%<br />
- A tariff of Rs.3.80 is reasonable<br />
- Cost of generation of conventional power have gone up by 27%<br />
- The 5D x 7D array dimension for erection of wind mills is a killing one. We should<br />
take a call and change the array dimensions.<br />
- We should not control NCES power growth in any state. Maharshtra is ready to<br />
purchase at the rate of Rs.7.00 to Rs.8.00 and there is a good demand for<br />
power.<br />
Mr.Sukumaran, Advisor, Cogen, Ministry of New and Renewable Energy Sources<br />
- For NCES IPP growth in <strong>Tamil</strong> <strong>Nadu</strong>, the power purchase tariff shall be revised.<br />
- A capital cost of Rs. 5.5 Cr. to 5.75 Cr. is recommended<br />
- If WISE is coming out with some scientific study and proof, we can change the<br />
array dimensions for erection of wind mills.<br />
Mr.T.B. Chikkoba, Former Member, TNEB:<br />
- With regard to OA scheduling charges, I am of the opinion that load despatch is<br />
not doing any despatch job daily in wind mills. They do not collect data from all<br />
the 5000 wind mills and tabulate them to arrive at the availability for the day. So<br />
real despatching is not done.<br />
- Wind is a infirm energy. There are methods to predict and make it a<br />
despatchable energy for which you need extra equipments like SCADA, etc<br />
which have not been installed in <strong>Tamil</strong> <strong>Nadu</strong>. Under such circumstances, I feel<br />
that it is not fair or correct on the part of TNEB to levy scheduling charges for<br />
wind mills. It does not come under merit order.<br />
- The capital cost and the O&M cost have been increasing during the control<br />
period of three years. But no clear data has been filed by the developer on<br />
increase of O&M charges.<br />
106
- Tariff setting every year is the best. In a stage when TNEB cannot stop load<br />
shedding, carryover should be permitted except in Hydel season when it is<br />
available in plenty. They should be allowed to make full use of energy generated.<br />
- Reducing wheeling charges to 2% is not fair. Wind mills were located in scanty<br />
far off areas earlier. It is not consumed in local area, power is being exported and<br />
230 kV lines are overloaded. Therefore, the wheeling charge of 5% is justified.<br />
- The increase in infrastructure cost should be analysed by a group. There should<br />
be a match between wind projects and evacuation facility by TNEB.<br />
- In best areas with old machines, intercropping may be done.<br />
- Chairman, TNERC requested MNRE to give about Capital cost and WISE about<br />
relocation, etc.<br />
List of participants:<br />
1. Mr. E.V.R. Sastry, Senior Advisor, Centre for Energy Technology, Osmania<br />
University, Hyderabad<br />
2. Mr.Debashish Majumdar, CMD, IREDA<br />
3. Mr.T.C.Tripathi, Adviser, Solar, MNRE<br />
4. Mr.C.R.Nagarajan, Tata BP Solar<br />
5. M/s. Sri Power, Hyderabad<br />
6. Mr. K.E. Raghunathan, M.D., SOLKAR Energy<br />
7. Dr. M. Kumaravel, Professor, IIT, Chennai<br />
8. Mr. Rajendra V.Kharul, Head, CWP, WISE, Pune<br />
9. Mr. Mohan Varghese Chunkath, IAS, CMD, TEDA<br />
10. Mr.C.S.Y.S. Rao, MD, Titan Energy Systems<br />
11. Mr.R.Chellappan, M.D.,Numeric Power Systems<br />
12. Mr. S. Kathiresan, Member(Accounts) /TNEB<br />
13. Mr.T.K.Chikkoba, Former Member, TNEB & SAC Member, TNERC<br />
14. Mr.K.Venkatesan, IAS (Retd), SAC Member<br />
15. Mr.K.Raghunandan, MD, EID Parry India Ltd.<br />
16. Mr.Ram V.Thiagarajan, CMD,M/s.Thiru Arooran Sugars Ltd.<br />
17. Mr.R.Murugesan, VP, M/s.Bannari Amman Sugars<br />
18. Mr.K. Raghu, MD, M/s.Ind Bharath<br />
19. Mr.Santhosh Kamat, Co-founder, M/s.Auromira Energy<br />
20. Mr.S. BalaSubramanian, Director, Avante Garde Engineers & Consultants (P)<br />
Ltd.<br />
21. Mr.S.C. Natu, Senior Vice President, MITCON, Pune<br />
22. Mr.K.P. Sukumaran, Advisor, Cogen, MNRE<br />
23. Mr. Kasthuri Rangaiyan, VP, Indian Wind Power Association<br />
24. Mr. A.H. Pandit, Consultant, IWEA<br />
25. Mr. K. Venkatachalam, Chief Advisor, TNSMA<br />
26. Mr.P.Vetrivelan, M/s. Sri Shanmugavel Mills<br />
27. Mr.Jayachandran, M/s.Premier Mills, Coimbatore<br />
28. Mr.Ramesh Kymal, M/s.Vestas<br />
29. Mr. Ramani, M/s. Indian Wind Turbine Manufacturers Association<br />
107
Annexure – IV<br />
PROCEEDINGS OF THE SIXTEENTH STATE ADVISORY COMMITTEE<br />
MEETING HELD ON 16-02-2009<br />
108
Annexure – IV<br />
PROCEEDINGS OF THE SIXTEENTH STATE ADVISORY COMMITTEE MEETING<br />
HELD ON 16-02-2009.<br />
Members Present:<br />
1. Thiru. S.Kabilan Chairman / TNERC<br />
2. Thiru. B. Jeyaraman Member / TNERC<br />
3. Thiru. R.Rajupandi Member / TNERC<br />
4. Thiru. S.Mohan Verghese Chunkath, I.A.S. Member / SAC<br />
5. Thiru. C.P.Singh, I.A.S. Member / SAC<br />
6. Thiru. K.Venkatesan, I.A.S. (Retd) Member / SAC<br />
7. Thiru. T.B.Chikkoba Member / SAC<br />
8. Dr. M.Abdullah Khan Member / SAC<br />
9. Dr. U.Sankar Member / SAC<br />
10. Thiru. N.L.Rajah Member / SAC<br />
11. Thiru. S.Rathinasabapathy Member / SAC<br />
12. Thiru. S.Pancharathinam Member / SAC<br />
13. Thiru.S.V.Balasubramaniam Member / SAC<br />
14. Thiru. A.Vellayan Member / SAC<br />
15. Thiru. V.Sethuraman Member / SAC<br />
16. Thiru. P.Gajapathy Member / SAC<br />
17. Thiru K.P.Sukumaran Special Invitee<br />
18. Thiru. Debashish Majumdar Special Invitee<br />
19. Thiru. K.Kasthoorirangaian Special Invitee<br />
20. Thiru. Santosh Kamat Special Invitee<br />
The meeting commenced with welcome address by Chairman, TNERC. Chairman,<br />
TNERC stated that <strong>Tamil</strong> <strong>Nadu</strong> has been ahead of all States in promoting wind power.<br />
But last year Gujarath has overtaken <strong>Tamil</strong> <strong>Nadu</strong> by about 300 MW. Even Maharashtra<br />
is ahead of <strong>Tamil</strong> <strong>Nadu</strong> in establishing wind power. The reasons could be<br />
1) Exploitation of class A wind sites is over in <strong>Tamil</strong> <strong>Nadu</strong>.<br />
2) Unattractive tariff in the State<br />
3) Constraints in evacuation facilities<br />
Chairman, TNERC also stressed the importance of encouraging wind energy as it is<br />
environmentally a clean source of energy. Even though it is infirm in nature and available<br />
only for 6 to 7 months in a year, it helped <strong>Tamil</strong> <strong>Nadu</strong> during power deficit situation to a<br />
great extent. He also stated that the installed capacity of wind power in <strong>Tamil</strong> <strong>Nadu</strong> is<br />
about 4,100 MW, which accounts for 44% of the installed capacity of wind power in<br />
India. Nearly 15 to 20% of our peak demand is supported by wind power.<br />
109
Chairman, TNERC briefed the consultative paper on “Power procurement by distribution<br />
licensee from wind energy generators and allied open access issues” and requested the<br />
members to offer their views on important parameters. This was followed by a<br />
presentation on concept paper by Director (Engineering). The views expressed by the<br />
SAC members and special invitees are summarized below:<br />
1. CAPITAL INVESTMENT<br />
Chairman, <strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> <strong>Regulatory</strong> Commission(TNERC):- The proposed<br />
capital cost of Rs.5.60 crores/MW is based on the average capital cost furnished by<br />
IREDA and MNRE. A sum of Rs.25 Lakhs was discounted towards Infrastructure<br />
Development Charges (IDC) from the proposed capital cost of Rs.5.60 crores as the<br />
same was struck down by the Commission in its order <strong>dated</strong> 19-09-2008.<br />
Thiru. C.P.Singh, I.A.S., Chairman, <strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board (TNEB): - As the<br />
breakup for the capital cost of Rs.5.35 crores per MW is not furnished in the consultative<br />
paper, TNEB is not in a position to offer remarks.<br />
Chairman, TNERC:- This capital cost consists mainly civil works and machinery cost.<br />
The land values vary from place to place.<br />
Member – II, TNERC:- Even TNEB did not furnish the breakup in their suggestions of<br />
Rs.4 to 4.5 crores in response to the concept paper.<br />
Thiru. Debashish Majumdar, Chairman and Managing Director, Indian Renewable<br />
Energy Development Agency (IREDA):- Price of the wind machine varies over time<br />
and therefore Commission can consider indexing option for determining the cost of wind<br />
machine. The cost of wind machine mainly depends upon the steel price in the market.<br />
Member – II, TNERC:- The control period is only for two years, in that situation does it<br />
require indexing for the second year?<br />
Chairman, TNEB:- Indexing is a better option.<br />
110
Thiru. S.Pancharathinam, , President, <strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Employees Central<br />
Organisation:- Even TNEB’s thermal generation capital cost is around 4 – 5 crores per<br />
MW and the proposed cost of wind machine is not digestible.<br />
Thiru. S.Mohan Verghese Chunkath, I.A.S., Chairman and Managing Director,<br />
<strong>Tamil</strong> <strong>Nadu</strong> Energy Development Agency (TEDA):- The data available on the cost of<br />
wind machine in the market is little. Information available on financial data is not<br />
accurate. The steel and cement price in the market is volatile. Indexing may be<br />
incorporated in fixing the cost of wind machine.<br />
Thiru K.P.Sukumaran, Advisor, Ministry of New and Renewable Energy Sources<br />
(MNRE):- Precise data for break up is not available. The 5.6 crores per MW was based<br />
on the average cost of 40 numbers of applications received recently. The break up<br />
details of the capital cost may be worked out roughly as follows:<br />
(i) Land – 5%<br />
(ii) Plant and machinery – 85% and<br />
(iii) Civil works – 10%.<br />
The wind turbine cost may comedown in the forthcoming years.<br />
Dr. U.Sankar, Honorary Professor, Madras School of Economics:- Base year is<br />
important. Capital cost constitutes land, plant, machinery and civil works. Land cost is<br />
location specific and it is to be separated from project cost and there should not be any<br />
depreciation on land cost. The capital cost of thermal is comparatively low because of<br />
the variable cost involved and it is increasing. Therefore wind capital cost is high.<br />
Thiru. N.L.Rajah, Trustee/Consumer Action Group (CAG):- The proposed cost plus<br />
tariff is not in line with the Act, National <strong>Electricity</strong> Policy and Tariff policy. This will not<br />
promote competition. Section 63 of the Act and clause 6.4.2 of NEP stipulates such<br />
procurement by competitive bidding. Rajasthan has decided to go for competitive<br />
bidding from 31.03.2009. Section 62 of the Act specifies maximum and minimum price<br />
under shortage condition. Hence, considering the installed capacity in <strong>Tamil</strong> <strong>Nadu</strong>, we<br />
should go for competitive bidding with floor and ceiling rate of tariff.<br />
111
Thiru. V.Sethuraman, Director(Power), Neyveli Lignite Corporation Ltd (NLC).:- The<br />
capital cost of thermal generation has gone upto 5 crores per MW for a capacity of 1000<br />
MW station. Considering the smaller capacity of wind machine, the 5.35 crores per MW<br />
is not high. Commission can fix a scale or benchmark for capital cost of wind machine.<br />
Declining trend in wind capacity addition in <strong>Tamil</strong> <strong>Nadu</strong> is noticed in last couple of years.<br />
Tariff on cost plus will bring the capacity addition in the State. Once the TNEB is in<br />
comfortable position competitive bidding can be introduced. Till then, cost plus approach<br />
can be adopted.<br />
Thiru. T.B.Chikkoba, Former Member(Generation), TNEB:- The capital cost of the<br />
wind machine depends upon the manufacturer/supplier. The cost of the wind machine is<br />
determined by the market only and not determined by any other factor. The cost of wind<br />
machine is raised due to increase in demand. Only class B sites are available in <strong>Tamil</strong><br />
<strong>Nadu</strong>. Manufacturers are not reducing the price even when steel and cement prices<br />
have comedown. Commission does not have authentic data about the cost of wind<br />
machines. As per the <strong>Electricity</strong> Act, 2003 Central <strong>Electricity</strong> Authority (CEA) has to get<br />
all the data and the same has to be published in the form of a book. Commission can fix<br />
the exact cost only if we have authentic data. Suppliers are not willing to share the cost<br />
details. Commission can request the capital cost from the<br />
suppliers/manufacturers/captive users and 5 crores per MW is reasonable.<br />
Chairman, TNERC:- Market price can not be relied upon and therefore Commission has<br />
gone by the figures of IREDA since they are financing the project. Control period is only<br />
two years and indexing is a complicated issue in the present volatile condition.<br />
Thiru. K.Kasthoorirangaian, Vice President, Indian Wind Power Association:- The<br />
cost of wind machine is market driven. Steel and cement prices in the last 3 years have<br />
increased considerably. The wind machines in <strong>Tamil</strong> <strong>Nadu</strong> are being erected on turnkey<br />
basis and the capital cost ranges from 5.6 to 6.85 crores per MW. The input costs have<br />
comedown, but the manufacturers have not brought it down. The capital cost never<br />
comes down to 5.6 crores per MW and the proposed rate is on lower side. The<br />
Infrastructure Development Cost (IDC) has been made nil only to those developers who<br />
sells electricity to TNEB. But in <strong>Tamil</strong> <strong>Nadu</strong> 65% of the WEGs are captive users and the<br />
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Commission should take care of majority people. Rs.6.25 crores per MW may be<br />
adopted towards capital cost. Only class C sites are available in <strong>Tamil</strong> <strong>Nadu</strong>.<br />
Thiru. S.Pancharathinam:- WEGs are not giving energy to TNEB but consuming<br />
themselves. The views of Chairman, TNEB should be taken into account. Government<br />
can give subsidy/concession to the WEGs. The present tariff for wind energy itself is<br />
high. The basis for the proposed capital cost of 5.35 crores per MW is to be given and it<br />
is on the higher side. The WEGs have never helped TNEB and the government. The<br />
cement and steel prices have come down recently. The Commission should take<br />
appropriate steps to tie-up all the wind power produced to TNEB.<br />
Dr. M.Abdullah Khan, Retired Professor, Anna University:- Preferential tariff can be<br />
given to the WEGs as per NTP. There are problems in arriving at the tariff rate.<br />
Competitive bidding among the respective suppliers should be introduced.<br />
Chairman, TNERC:- In case of thermal, there are limited bidders participating in the<br />
competitive bidding. There are about 8500 WEGs, 35% to 40% accounts for sale to<br />
TNEB and the 65% accounts for captive use. There will be lot of difficulties in<br />
competitive bidding due to more numbers of small WEGs in <strong>Tamil</strong> <strong>Nadu</strong>. There will be<br />
variance of rate by different WEGs.<br />
Dr. M.Abdullah Khan:- Step by step approach may be introduced for competitive<br />
bidding. Market clearing price may be adopted even though more numbers of small<br />
players exist.<br />
Dr. U.Sankar:- Competitive bidding will be useful since the WEGs are reluctant to reveal<br />
the true cost.<br />
Thiru. T.B.Chikkoba:- Already agreement with TNEB is in force in respect of existing<br />
plants. Small WEGs will not come for competitive bidding due to higher cost for lack of<br />
economy of scale. <strong>Tamil</strong> <strong>Nadu</strong> do not have potential sites to put up more than 300 – 400<br />
MW. WEGs can not come for competitive bidding since wind density varies from place to<br />
place. <strong>Tamil</strong> <strong>Nadu</strong> is in shortage of power and we need to develop wind projects. Lots of<br />
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problems will arise in competitive bidding and hence suggested to continue the present<br />
policy.<br />
Thiru K.P.Sukumaran:- The competitive bidding in the advanced countries like U.K. is<br />
not successful. Preferential tariff is to be continued as recommended by the working<br />
group of FOR.<br />
Thiru. Debashish Majumdar:- The <strong>Electricity</strong> Act, 2003 stipulates competitive bidding in<br />
procurement of power. The government has not notified the standard bidding documents<br />
yet for procurement through competitive bidding for NCES power.<br />
Thiru. S.Rathinasabapathy, General Secretary, <strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Workers<br />
Progressive Union:- Already, TNEB is purchasing energy at higher cost. The proposed<br />
capital cost is high.<br />
Chairman, TNEB:- Risk factor in procuring wind power has not been factored in the<br />
consultative paper. Infirm power can not be more than 10 – 12%. Wind power is infirm in<br />
nature and varied 0 to 900 MW during last two months.<br />
Thiru. K.Venkatesan, I.A.S. (Retd):- Enquired whether TNEB wants maximum<br />
percentage or ceiling on the procurement of wind power.<br />
Thiru. S.Mohan Verghese Chunkath:- All NCES source of energy should be treated<br />
equally. If the infirm power in the grid is more, it will bring difficulty in distribution. Special<br />
incentive for wind development may be stopped.<br />
Thiru. T.B.Chikkoba:- Eventhough wind is seasonal, in some countries like U.K.,<br />
Denmark, etc. wind energy is scheduled and dispatched using advanced forecasting<br />
method. Investment in SCADA will be helpful in scheduling and dispatch of wind power.<br />
Chairman, TNEB:- The risk factor in buying wind energy should be addressed properly.<br />
The wind power is seasonal and infirm in nature. TNEB transmission assets are idle<br />
almost for 8 months in a year. TNEB could not take back its investment. We are<br />
supplying power to the consumers at cheaper rate. Commission will have to take this<br />
into consideration.<br />
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Chairman, TNERC:- TNEB should buy certain quantity of wind power. It is man<strong>dated</strong>.<br />
TNEB can recover its cost invested in generation, transmission and distribution by filing<br />
ARR before the Commission. But TNEB has not filed any ARR. It is not the fault of the<br />
Commission. All the cost of TNEB is passed to the consumer through tariff.<br />
Thiru. T.B.Chikkoba:- Renewable energy is a clean source of energy and the same<br />
should be encouraged both by TNEB and Commission. There should be a proper energy<br />
mix to compensate the climate change. The price of thermal power will go up in future<br />
since their fuel are depleting in nature. At the same time, the cost of renewable will come<br />
down in future.<br />
Thiru K.P.Sukumaran:- The subject matter of integrating wind energy in to the grid was<br />
discussed in the GERC meeting held recently. It is a fear and not a fact particularly when<br />
we are in shortage. Coordination should be there among the distribution licensee, SLDC,<br />
STU and WEGs.<br />
Dr. U.Sankar:- Power from Conventional source will be more than 60% of the actual<br />
cost if we take into account the social cost. The cost of wind energy may come down in<br />
the next 3 to 4 years. Ultimately consumers are paying for the preferential cost of wind<br />
power and not the licensee.<br />
Thiru. N.L.Rajah:- The role of Commission seems to be reduced to the level of cost<br />
accountants in fixing only tariff. Whereas they have man<strong>dated</strong> with brighter role as per<br />
section 86(2). Commission has to advise the government in framing the policies and<br />
guidelines for bidding. The Commission should also write to TNEB to reduce T&D<br />
losses.<br />
Chairman, TNERC:- Clarified that as man<strong>dated</strong> in the Act, Commission is advising the<br />
State government as and when required.<br />
Thiru. S.Rathinasabapathy:- On what basis the capital cost of Rs.5.60 crores per MW<br />
was arrived. TNEB is purchasing power at higher cost and selling at lower rates.<br />
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Chairman, TNERC:- Clarified that the capital cost was arrived on the basis of data given<br />
by IREDA and MNRE. Further, Chairman, TNERC clarified that TNEB is not able to<br />
meet the cost of energy since they have not filed ARR for so many years. Even the<br />
subsidy portion given by the Government is not sufficient to meet the gap.<br />
2. CAPACITY UTILIZATION FACTOR (CUF)<br />
Chairman, TNERC:- CUF is another important issue and the CUF of 27.15% was<br />
arrived based on the generation data given by TNEB and the data already available in<br />
the order no.3 <strong>dated</strong> 15.06.2006. De-rating of 1% per annum after ten years of operation<br />
is also provided.<br />
Thiru. T.B.Chikkoba:- The data from which the CUF was calculated were not given in<br />
consultative paper. Last time CUF was calculated after getting data from C-WET. But<br />
this time the old method was not adopted. The proposed CUF of 27.15% is high since<br />
the wind potential areas were already utilized and only class C sites are available. Derating<br />
factor can not be linked with wind availability. 1% reduction of de-rating after five<br />
years of operation is suggested.<br />
Member-II, TNERC:- In next two years we expect a maximum of 2000 MW capacity<br />
addition from wind source. WEGs have already purchased lands in class A, B and C<br />
sites. The CUF of 27.15% is weighted average of all four regions. Viz. Muppandal,<br />
Sengotta, Palghat and Cumbam pass. It was arrived at after getting actual data from<br />
TNEB. The CUF is not calculated on ad-hoc basis.<br />
Chairman, TNERC:- It is a voluminous data. However the CUF data will be sent to the<br />
Members if required.<br />
Thiru. K.Kasthoorirangaian:- The wind turbines have to be de-rated every year<br />
continuously. In 2007-08, the CUF has comedown to 10.79% from 17.27% in respect of<br />
99 wind mills in Muppandal area.<br />
Member-I, TNERC:- Sample study on 99 machines can not be realistic representative to<br />
all wind machines. De-rating of the wind machines also depends upon the maintenance.<br />
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Thiru. K.Kasthoorirangaian:- Maintenance of wind machines is good by the private<br />
promoters<br />
Chairman, TNERC:- Further analysis will be made after getting data from TNEB and<br />
developers.<br />
3. RETURN ON EQUITY (ROE)<br />
Chairman, TNERC:- RoE of 14% post-tax (17.63% pre-tax) has been proposed by the<br />
Commission. CERC has proposed 15.5% post-tax which is equivalent to 19.85% pretax.<br />
Thiru. T.B.Chikkoba:- Why not follow the older system of 16% post-tax? He suggested<br />
to pay tax separately in addition to tariff rate by each WEGs.<br />
Chairman, TNERC:- It will be difficult to reimburse IT to each WEGs as they are large in<br />
numbers.<br />
Thiru. V.Sethuraman:- Suggested to adopt post-tax @ 15.5% as decided by CERC.<br />
Member-II, TNERC:- Post-tax can be implemented for a project specific tariff and for a<br />
generalized tariff, pre-tax is a better option.<br />
Thiru. Debashish Majumdar:- RoE of 14% is not preferential treatment. Like<br />
conventional project, RoE is not guaranteed in case of renewable project due to single<br />
part tariff. Hence, RoE for renewable projects should be at least on par with conventional<br />
projects.<br />
4. INTEREST ON DEBT<br />
Chairman, TNERC:- The interest rate of 12% was arrived as per the rate offered by<br />
IREDA.<br />
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Thiru. Debashish Majumdar:- State Bank of India’s (SBI) long term Prime Lending<br />
Rate (PLR) with 2% additional interest rate may be adopted in future. Present SBI PLR<br />
rate is 11.75%. The interest rate of IREDA varies from 11.75% to 12.9%.<br />
Chairman, TNERC:- PLR also varies every quarter and will introduce uncertainties in<br />
tariff. Therefore, we will go by IREDA rate.<br />
Thiru. Debashish Majumdar:- In last 21 years IREDA rate was revised once in a year<br />
only. But in the last six months, the interest rate was revised 4 times. But banks revised<br />
interest rate only once in last year.<br />
CMD, TEDA:- The loan quantity offered by IREDA is small. Therefore bank rate is good.<br />
Chairman, TNERC:- Appropriate view will be taken<br />
5. DEPRECIATION<br />
Chairman, TNERC:- Depreciation rate of 4.5% under straight line method is proposed<br />
by the Commission.<br />
Thiru. V.Sethuraman:- Proposed rate of 4.5% is correct and acceptable.<br />
6. OPERATION AND MAINTENANCE<br />
Chairman, TNERC:- The Commission has proposed 1.10% of the cost of the project for<br />
first 5 years with escalation of 5% per year thereafter.<br />
Chairman, TNEB:- O&M calculation may be charged on the cost of machinery instead<br />
of the capital cost of the project.<br />
Thiru. T.B.Chikkoba:- The capital cost for the wind energy project considered in<br />
Maharashtra ERC is only 4 crores per MW and hence higher O&M is reasonable. But in<br />
the proposed tariff the capital cost considered is more and hence the proposed rate of<br />
O&M is reasonable.<br />
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Thiru K.P.Sukumaran:- 85% of the capital cost can be considered for O&M calculation<br />
since O&M is related to machinery only.<br />
Thiru. S.Pancharathinam:- He supported TNEB’s suggestion of calculation of O&M on<br />
the percentage of machinery instead of capital cost.<br />
Chairman, TNERC:- Whether civil works required maintenance? As suggested by CMD<br />
IREDA, we may consider 85% of the capital cost towards cost of machinery, 10%<br />
towards civil and 5% towards land. O&M may be calculated based on the machinery<br />
cost.<br />
Thiru. T.B.Chikkoba:- The changes in O&M suggested by TNEB is very small amount<br />
and suggested not to change. It is more reasonable to have a stable formula.<br />
7. INSURANCE<br />
Chairman, TNERC:- The proposed insurance charge is 0.75% on the project cost for<br />
the first year and reduction of 0.5% every year thereafter.<br />
Thiru. S.Pancharathinam and Thiru. S.Rathinasabapathy: - Suggested that only<br />
machine cost shall be included for insurance calculation as proposed by TNEB.<br />
Chairman, TNERC:- We can consider the insurance cost only on machinery as<br />
considered for O&M<br />
8. CONTROL PERIOD<br />
Chairman, TNERC:- Control period was reduced from 3 years to 2 years and the<br />
Commission proposed that the new tariff order will be effective from the date of tariff<br />
order.<br />
Thiru. S.Rathinasabapathy: - Is there any uniformity with other States who revise the<br />
control period every year.<br />
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CMD, TEDA:- For wind, the change in control period does not make much difference.<br />
But in case of Bio-mass, it makes a difference since there is a variable cost in bio-mass.<br />
9. APPLICABILITY OF THE ORDER<br />
Chairman, TNERC:- The proposed order shall be applicable to all WEGs commissioned<br />
on or after the date of this order. The point suggested by TNEB is not relevant.<br />
10. TARIFF MECHANISM<br />
Chairman, TNERC:- Generalized, cost plus single part tariff is proposed in the concept<br />
paper. Project specific tariff may be determined for large projects.<br />
Member-II, TNERC:- For a total of 200 MW or more by a single developer within the<br />
control period, project specific tariff can be fixed.<br />
CMD, TEDA:- The project specific tariff can be fixed if the tariff of specific project is<br />
lesser than the generalized tariff.<br />
Thiru. K.Venkatesan:- Location specific tariff may be adopted for larger capacity<br />
projects.<br />
CMD, IREDA:- We may look into the project specific tariff if there is any change in the<br />
policy at central level. There will be change in tariff parameters in both the case. There<br />
might be lower PLF and higher efficiency in project specific tariff.<br />
Chairman, TNERC:- Pass wise tariff may be thought of. This is a greater issue and may<br />
be discussed in separate meeting.<br />
11. RENEWABLE PURCHASE OBLIGATION (RPO)<br />
Chairman, TNERC:- Commission has proposed to fix 7.5% as the minimum purchase<br />
obligation. Whether the minimum percentage shall include all the source of NCES or<br />
wind alone. Whether only the energy purchased by the TNEB should be considered or<br />
energy input to the system should be considered for deciding RPO.<br />
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Thiru. K.Venkatesan:- In <strong>Tamil</strong> <strong>Nadu</strong> we are in deficit and for NCES there is no backing<br />
down. Therfore, is it necessary to fix minimum percentage for RPO?<br />
Chairman, TNEB:- NCES generation is seasonal, but RPO is given for per annum. It<br />
shall be on pro-rata with reference to the number of seasonal months. He wants to know<br />
the logic behind in fixing minimum percentage of purchase.<br />
Thiru. V.Sethuraman:- Captive consumption shall not be taken into account for fixing<br />
RPO.<br />
Thiru. T.B.Chikkoba:- Captive consumption should be included in RPO to find out the<br />
real consumption of NCES and to find out the energy mix. The RPO should be increased<br />
to minimum of 15%.<br />
Chairman, TNEB:- The RPO percentage should be fixed to minimum which shall<br />
include captive consumption and all sources of NCES.<br />
Member-II, TNERC:- Shall we take standby generation into account in calculating RPO?<br />
If so, it shall be included in the denominator of the RPO formula.<br />
Thiru. V.Sethuraman:- Standby generation should not be included in calculating RPO.<br />
Thiru. N.L.Rajah:- Fix a minimum percentage of RPO at more than 10%.<br />
Thiru. K.Kasthoorirangaian:- If we fix minimum percentage of RPO, there will not be<br />
any incentive for growth. The Gujarath ERC has fixed RPO of 2%. If we fix a lower<br />
percentage like this, distribution licensee will say that wind power will not be purchased<br />
beyond that limit. Such case should not happen in <strong>Tamil</strong> <strong>Nadu</strong>. Hence, it should be at<br />
least 15%.<br />
Thiru. K.Venkatesan:- Suggested to fix minimum percentage, but it should be<br />
reasonable.<br />
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Chairman, TNERC:- The percentage of RPO shall be calculated from all consumption<br />
including standby generation. The details of standby generation will be obtained from<br />
electrical inspectorate. As per the new formula, the denominator will include standby<br />
generation and that will bring down the present renewable consumption of 11.08%.<br />
Hence, the RPO percentage may be fixed around 12%.<br />
12. ENERGY PURCHASE AGREEMENT (EPA)<br />
Chairman, TNERC:- It is suggested that distribution licensee shall draft an EPA taking<br />
cognizance of the tariff provisions and EPA related principles elaborated in the order and<br />
file a model EPA for approval of the Commission. At present there is no exit clause. But<br />
it is proposed in the consultative paper. IREDA wants the period of PPA shall be tied up<br />
to the entire loan period. TNEB wants to impose penalty if the WEGs wind up the<br />
operation before the expiry of the agreement period as TNEB had established the<br />
infrastructure facility. Even, if the transmission assets owned by TNEB are not utilized by<br />
the WEGs, it is not a loss to TNEB since they can recover the cost for the stranded<br />
assets through ARR.<br />
Thiru. T.B.Chikkoba:- Why should the consumers bear the cost for stranded assets?<br />
Member-II, TNERC:- There will not be any loss to TNEB even if the WEGs exit from<br />
agreement, they will go for EWA and the transmission and wheeling charges can be<br />
recovered by TNEB.<br />
Chairman, TNERC:- We can presume that WEGs will continue in the business.<br />
Thiru. K.Kasthoorirangaian:- The WEGs will not go out of business. It is a hypothetical<br />
one.<br />
CMD, IREDA:- As a financier, IREDA wants that the agreement should be continued<br />
throughout the loan tenure.<br />
Chairman, TNERC:- As a regulator, we have to look in to the matter legally and how this<br />
should be addressed.<br />
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Thiru. K.Venkatesan:- In that case, giving 3 months notice arises only after the loan<br />
tenure.<br />
Chairman, TNEB:- TNEB is willing to pay compensation if TNEB breaks the agreement.<br />
What is the obligation to the WEGs, if they go out of business?<br />
Thiru. K.Venkatesan:- It may not be good for WEGs if TNEB is given the exit option by<br />
serving 3 months notice.<br />
CMD, IREDA:- Supported Thiru. K.Venkatesan’s suggestion.<br />
Thiru. S.Pancharathinam:- The WEGs should not be allowed to divert power to other<br />
than TNEB. TNEB can exit, but generator should not be allowed to exit from the<br />
agreement.<br />
Chiarman, TNERC:- As per the <strong>Electricity</strong> Act, 2003 open access can not be denied.<br />
Thiru.S.V.Balasubramaniam, CMD, Bannari Amman Sugars Limited:- Some<br />
conditions may be specified for exit clause and penalty may be levied for exit from the<br />
agreement.<br />
Chairman, TNEB:- Our transmission system is always ready. There shall not be any<br />
transmission constraint in wind power evacuation.<br />
13. ENERGY WHEELING AGREEMENT (EWA)<br />
Thiru. K.Kasthoorirangaian:- The Distribution Licensee and the WEGs should sit<br />
together and frame agreement and the same may be got approved by the Commission.<br />
Chairman, TNERC:- Commission can draft agreement and invite both TNEB and WEGs<br />
for a meeting to finalize the model agreement.<br />
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14. CLEAN DEVELOPMENT MECHANISM (CDM)<br />
Member-II, TNERC:- Commission has proposed that 50% of the CDM benefits will go to<br />
the WEGs and the balance 50% will be shared by the Distribution Licensee and the<br />
STU.<br />
Thiru. K.Kasthoorirangaian:- As per UNFCC guidelines, the CDM benefits will be<br />
given only if the project is viable after getting financial additionality through CDM. If we<br />
share the CDM benefits with others, we may not able to get CDM benefits. Hence, the<br />
CDM benefits should not be shared with TNEB.<br />
Thiru. T.B.Chikkoba:- Distribution licensee does not play role in getting CDM benefits.<br />
The full benefits should go to only WEGs.<br />
Member-II, TNERC:- TNEB only develops all the infrastructure for power evacuation<br />
and therefore CDM benefits should be given to TNEB also.<br />
Thiru K.P.Sukumaran:- The principles adopted by the FOR working group may be<br />
considered on sharing the CDM benefits.<br />
Chairman, TNEB:- Already RoE is assured to WEGs and therefore CDM benefits<br />
should be shared by WEGs with TNEB.<br />
Thiru.S.V.Balasubramaniam:- Getting CDM benefits is not a easy job and the<br />
promoters have to engage experts for availing CDM benefits. Getting CDM benefits will<br />
take 1 to 2 years. Further, all WEGs will not get CDM benefits and therefore the option of<br />
sharing CDM benefits should be left to the WEGs.<br />
Dr. U.Sankar:- If only 4% of the projects get CDM benefits, it seems something is wrong<br />
in the approach in getting the CDM benefits.<br />
Thiru. K.Kasthoorirangaian:- If Commission imposes sharing the CDM benefits with<br />
TNEB, nobody will get the benefits of CDM in <strong>Tamil</strong> <strong>Nadu</strong>.<br />
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Thiru K.P.Sukumaran:- Lot of efforts are required from promoter side to get the CDM<br />
benefits. That is why FOR recommended higher percentage of CDM benefits to the<br />
promoter in the initial 5 years.<br />
Dr. M.Abdullah Khan:- The CDM benefits should be shared between the promoters<br />
and the TNEB.<br />
Chairman, TNERC:- Indicated the percentage of sharing of CDM benefits in various<br />
other States and therefore sharing is necessary.<br />
Chairman, TNEB:- Accepts the suggestion of Chairman, TNERC.<br />
Thiru. K.Kasthoorirangaian:- If the CDM benefits are to be shared, the distribution<br />
licensee should share the initial CDM expenses.<br />
Thiru.S.V.Balasubramaniam:- If the CDM benefits are to be shared with TNEB, the<br />
distribution licensee could blame the WEGs in later date for selling the CERs at lower<br />
rate.<br />
Chairman, TNERC:- Suggested to adopt FOR formula.<br />
Thiru. K.Kasthoorirangaian:- Don’t shut door for CDM benefits in <strong>Tamil</strong> <strong>Nadu</strong> and<br />
suggested not to share with TNEB.<br />
CMD, IREDA:- Ownership of CERs is with the WEGs.<br />
15. PAYMENT OF SECURITY TO THE WEGS<br />
Chairman, TNERC:- Commission proposes bankable security in favour of the generator<br />
for an amount equivalent to the average monthly bill.<br />
Thiru. K.Kasthoorirangaian:- Even though this clause is incorporated in EPA, this is<br />
not being followed by TNEB. TNEB takes 5 months for making the payment.<br />
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Chairman, TNEB:- WEGs cannot give conformity for per day generation of power. It is<br />
infirm in nature. TNEB do not have money for payment. Even, if we guarantee for one<br />
month payment, what will happen to the next month payment?<br />
Chairman, TNERC:- Suggested that payment has to be made to the WEGs within 30<br />
days and any delay may attract an interest rate of 1% per month.<br />
16. PAYMENT OF SECURITY DEPOSIT TO TNEB<br />
Chairman, TNERC:- Commission suggests that the captive consumers should pay two<br />
times of the maximum net energy supplied by the distribution licensee in a month in the<br />
previous banking period.<br />
Thiru. K.Kasthoorirangaian:- Agreed with the Commission<br />
17. WHEELING CHARGES<br />
Chairman, TNERC:- Commission has proposed wheeling charges of 5% of the energy<br />
wheeled by the WEGs which also include the line losses.<br />
Chairman, TNEB:- We have invested much in transmission sector for wind power<br />
evacuation. Our transmission assets are idle for many months.<br />
Chairman, TNERC:- TNEB can claim tariff for their assets through ARR. TNEB’s point<br />
of keeping the transmission assets idle is not correct since in some part of the State<br />
transmission facility is not adequate.<br />
Dr. M.Abdullah Khan:- Methods for calculating the losses should be prescribed.<br />
Thiru. T.B.Chikkoba:- In the earlier days, the generated wind energy might have been<br />
consumed locally. But nowadays, due to higher capacity addition of WEGs, the<br />
generated power has to be transferred from one place to another place. Hence loss will<br />
be more than 5%. Preferential treatment has to be given to wind power and the present<br />
system 5% wheeling charges may be continued.<br />
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Member-II, TNERC:- The maximum average loss is 10% if wind power is stepped upto<br />
230 kV from 11 kV and stepped down from 230 kV to 11 kV. The loss depends upon the<br />
point of injection and point of drawal. The TNEB’s account of 22% loss is not correct.<br />
CMD, TEDA:- Preferential tariff given at the beginning is acceptable. At present the<br />
WEGs are well established, It is to be seen whether TNEB can bear the burden of<br />
continuing the preferential treatment.<br />
Thiru.S.V.Balasubramaniam:- Already the potential windy sites are occupied and only<br />
the lesser windy sites are available. Therefore it is not reasonable to charge more than<br />
5%. In addition to wheeling charges, transmission charges are also being collected.<br />
Thiru. K.Kasthoorirangaian:- Initially TNEB assured only 2% of wheeling charges and<br />
therefore more WEGs have been established. Subsequently the wheeling charges have<br />
been increased to 5%. To encourage wind energy in our state, the present system<br />
should be continued.<br />
Thiru. K.Venkatesan:- Can we think of more than 5% wheeling charges? It is better to<br />
adopt a reality figure.<br />
Thiru.S.V.Balasubramaniam:- If we increase the wheeling charges, the investment in<br />
the wind energy will come down.<br />
Dr. M.Abdullah Khan:- We have to conduct a study on determining the losses.<br />
Thiru. T.B.Chikkoba:- The tariff rate for industries is Rs.3.50 per kWh and 65% of the<br />
wind energy is being used for captive purpose since captive use is advantageous for<br />
WEGs. Increase in wheeling charge by 1% or 2% can only be on adhoc basis. It is<br />
proved that there is no much loss due to wheeling of wind energy.<br />
Member-I, TNERC:- Because of displacement of energy in the grid, there will not be<br />
much loss.<br />
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18. CROSS SUBSIDY SURCHARGES<br />
Chairman, TNERC:- Commission has proposed 50% of the level prescribed for<br />
conventional energy sources.<br />
19. BANKING<br />
Chairman, TNERC:- Banking charges of 5% is proposed.<br />
Chairman, TNEB:- As Hon’ble High Court of Madras have stayed the matter relating to<br />
adjustment of banked energy to the captive users, the matter is subjudice.<br />
Member-II, TNERC:- The subject matter covered under the above stay is on a different<br />
issue, therefore it is not subjudice.<br />
Thiru. K.Kasthoorirangaian:- IWPA is also one of the party in the above matter and the<br />
Hon’ble High Court do not have jurisdiction in this matter.<br />
Chairman, TNERC:- Indicated the prevailing banking charges in different States.<br />
Chairman, TNEB:- Each state has unique problem. Therefore, it is not appropriate to<br />
compare the banking charges with other state.<br />
Thiru. K.Kasthoorirangaian:- WEGs are not permitted to use their own power due to<br />
imposition of R&C by TNEB.<br />
CMD, TEDA:- Banking is necessary to protect the interest of the WEGs, but it is to be<br />
limited to one year. To fulfill the obligation as prescribed in the Act/NEP/NTP, TNEB has<br />
to purchase the balance power from renewable sources.<br />
Chairman, TNERC:- R&C matter is not to be mixed with general order. If the wind<br />
energy is not banked, TNEB should buy the wind power at higher rate.<br />
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Thiru. K.Venkatesan:- Banking facility is a concession given to the generators. The<br />
WEGs have to sell the surplus energy to distribution licensee or bank the energy.<br />
Thiru. K.Kasthoorirangaian:- The WEGs can opt to sell other than the banked energy<br />
to the distribution licensee at the rate prescribed by the Commission.<br />
Thiru. T.B.Chikkoba:- If TNEB don’t bank the energy, they should purchase the wind<br />
energy at the rate prescribed by the Commission. If there is a power cut, the WEGs have<br />
to be allowed either to consume the energy or to sell to TNEB at the rate prescribed by<br />
the Commission.<br />
Member-II, TNERC:- IWPA suggestions can be included in the EPA.<br />
CMD, TEDA:- Agreed with the IWPA suggestion.<br />
20. EVACUATION FACILITIES<br />
Chairman, TNERC:- Commission has proposed that in case of 100% sale to distribution<br />
licensee, STU shall bear the cost of evacuation infrastructure. In case, if the WEGs opt<br />
for wheeling, the cost of developing evacuation infrastructure is to be reimbursed.<br />
Chairman, TNEB:- We don’t have sufficient money to invest in transmission<br />
infrastructure development since we have already invested massively in thermal<br />
projects. We will try to develop the transmission infrastructure as far as possible.<br />
21. ADJUSTMENT OF PEAK/OFF PEAK HOURS<br />
Chairman, TNERC:- Indicated the Commission’s proposal of adjustment of wind<br />
generation.<br />
Chairman, TNEB:- Since banking is provided, adjusting higher tariff TOD slot in a lower<br />
tariff TOD slot need not be permitted.<br />
Thiru. K.Venkatesan:- It is only beneficial to the TNEB, therefore TNEB can permit<br />
such adjustments.<br />
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22. TARIFF RATE<br />
Chairman, TNERC:- Tariff rate arrived is a result of the parameters discussed so far.<br />
Any change in the parameters will automatically reflect in the tariff rate.<br />
Thiru. T.B.Chikkoba:- The matter of considering the time value of money for the wind<br />
tariff is pending before the court of law. Hence it need not be considered now.<br />
Thiru. K.Kasthoorirangaian:- Tariff rate for group 1 and group 2 WEGs have to be<br />
revised due to increase in de-rating factor and O&M cost.<br />
Thiru. K.Venkatesan:- Tariff for Group 1 and Group 2 should not be revised. Further, if<br />
the capital cost is decreased whether the WEGs can accept downward revision of tariff?<br />
Thiru. K.Kasthoorirangaian:- There should not be any discrimination among the WEGs<br />
and hence tariff for Group 1 and Group 2 WEGs should also be revised.<br />
Chairman, TNERC:- Tariff for WEGs is not based on the normative principles, it is<br />
based on cost plus approach.<br />
23. REACTIVE POWER CHARGES<br />
Chairman, TNERC:- Indicated the Commission’s proposal of reactive power charges.<br />
Thiru. T.B.Chikkoba:- The reactive power charges for WEGs are more when compared<br />
to the charges in respect of bio-mass/co-generators.<br />
Member-II, TNERC:- WEGs are mainly induction generators. Due to its inherent<br />
characteristics to draw more reactive power from the grid, considering the stability of the<br />
grid, as deterrent measure, more reactive power charges has been imposed on WEGs.<br />
Chairman/TNERC, in his concluding remarks thanked all the members for their valuable<br />
suggestions and informed that the remaining two items will be taken up at a next<br />
meeting to be convened shortly.<br />
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Annexure – V<br />
PROCEEDINGS OF THE PUBLIC HEARING HELD ON 5 TH MARCH 2009<br />
131
Annexure – V<br />
PROCEEDINGS OF THE PUBLIC HEARING HELD ON 5 TH MARCH 2009<br />
Secretary, TNERC welcomed all the participants gathered for public hearing and<br />
requested to offer their views on the consultative papers for determination of tariff for<br />
wind Energy, Bio-Mass and bagasse based Cogeneration power.<br />
Thiru.V.Raghu, Secretary General, M/s.Indian Wind Power Association.<br />
Requested the Commission to set the following parameters for determination of<br />
wind tariff.<br />
CUF 23 % ; Capital Cost – Rs.6.00 cr./MW ; O&M Expenses – 1.80% for 2 years with<br />
5% escalation per annum ; Insurance - 0.75% on replacement value with 5% escalation<br />
thereafter; Interest – 13% ; ROE – 15.5 % (post tax) as per CERC norms ; tariff rate of<br />
Rs.3.90 per unit with annual escalation of 9 paise per unit. The tariff rate for group 1 and<br />
group 2 WEGs should also be revised on the principles of equality before law. The<br />
actual de-rating for the WEGs is around 7% in the last 3 – 4 years. The O&M charges<br />
has increased to 21 paise per unit and requested to follow the Maharashtra model of<br />
wind tariff determination.<br />
If Commission imposes sharing of CDM benefits with the licensee, the promoter<br />
will not get any CDM benefits. No cross subsidy surcharge for wheeling to third parties<br />
be levied; RPO should be at 15% ; Rebate for payment made within 15 days shall be as<br />
in Gujarat ; BPSC for payment made over 15 days shall be charged at SBI PLR ;<br />
permission for outside State sale be given ; Demand charges may be calculated based<br />
on the actual generation units only; adjustment of higher TOD slot units against lower<br />
TOD be allowed ; no scheduling and system operation charges be levied ; Permission<br />
for availing banked units during R & C period in addition to the TNEB quota shall be<br />
given. The lapsed units shall be sold to TNEB or permission must be given to carry over<br />
the lapsed units to the forthcoming years without any time restrictions. Prior discussion<br />
with generators is required for finalizing model EPA/EWA .<br />
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Thiru.K.Venkatachalam, Chief Adviser to <strong>Tamil</strong> <strong>Nadu</strong> Spinning Mills Association.<br />
Requested the Commission to set the following parameters for determination of<br />
wind tariff.<br />
CUF – 22%; Capital Cost – Rs.5.45 cr./MW ; The actual O&M cost is around<br />
1.89%. Commission may consider 1.69% of capital cost as O&M with the escalation<br />
prevailing in the market. Loan tenure may be fixed at 7 years with one year moratorium<br />
period. Interest on loan may be fixed at 13.5 %. The projects will get CDM benefits only<br />
if there is any viability gap. Hence, there shall not be any sharing of CDM benefits and it<br />
may be given to the Generators in full. The tariff for group1, group2 and proposed tariff<br />
may be fixed at Rs.3/- , Rs.3.20/- and Rs.3.40 respectively.<br />
Thiru.Ajit Pandit appeared for M/s.Indian Wind Energy Association, M/s.Simran<br />
wind power and M/s Super wind Power.<br />
The Control period of 2 year and the ROE of 17.63% specified in the<br />
consultative paper is agreeable. For the RPO there is no maximum limit mentioned in<br />
NTP, trajectory kind of target may be fixed. Regarding CUF, the wind potential sites are<br />
already exploited and 26.5% may be considered. Regarding capital cost, indexation with<br />
respect to steel and cement price movement may be introduced as introduced by<br />
Rajasthan ERC in their MYT order. The project may be exposed for 10 years MAT and<br />
10 years corporate tax. The interest on debt shall be based on PLR movement. Time<br />
value of money may be considered. The Cross subsidy Surcharge should be made nil<br />
since the cross subsidy surcharge formula introduced in the National Tariff Policy does<br />
not include the NCES sources. Control period was waived on 19-09-2008, the new order<br />
should have retrospective effect from that date otherwise there will be <strong>Regulatory</strong><br />
vacuum for the intermediate period.<br />
Thiru V.Thiagarajan, CMD, Thiruarooran Sugars.<br />
As PLF variability is there due to switching over of crops by farmers, availability<br />
of bagasse, etc. The availability of bagasse for the year 2009-10 will be lower than the<br />
availability in the year 2008-09. Commission may consider a block of 5 years for PLF<br />
calculation. Any variation may be adjured in the next year PLF requirement. Due to lower<br />
achievable PLF, the promoters could not take back their fixed cost. Generation over 55%<br />
PLF, such sale is paid at ABT rates which may be less than even the variable cost ;<br />
The actual calorific value of the bagasse is only 2272 Kcal/Kg due to higher moisture<br />
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content and hence, the actual station heat rate comes to 4000 k.cal./kwh. Cross subsidy<br />
surcharge may be waived. Capital cost shall be Rs.5.25 cr./MW. Payment to the<br />
promoters shall be paid within 30 days and any delayed payment over 30 days, interest<br />
at 18% per annum shall be paid to the promoter. Generator alone may avail the entire<br />
CDM benefits. The matter of levying taxes on generation and consumption is under<br />
litigation and the same may be accommo<strong>dated</strong> in the tariff order. Commission may<br />
permit to use coal in the off season so that the promoters can get the variable cost of<br />
coal along with the fixed cost.<br />
Thiru K.Raghunathan, MD, EID (P) ltd.<br />
PLF must be bankable and adjustment may be done every year. An average of<br />
55% PLF over a period of 5 years block may be considered by the Commission. Power<br />
from higher PLF shall be given the same rate. For the units generated using bagasse,<br />
even if the PLF is beyond 55 %, NCES tariff may be permitted instead of ABT rates.<br />
Cane crushing data furnished to the Government may be verified for fuel quantity for<br />
achieving 55% PLF. As various administrative expenses are involved in getting the CDM<br />
benefits, it may be permitted to be held by the Generators.<br />
Thiru N. Ramani, Indian Wind Turbine Manufacturers Association.<br />
The 3 years control period should be reduced from the date it was announced.<br />
The effective date for the new tariff should be either from 15 th May, 2008 or 19 th<br />
September, 2008. 15.5% post tax should be considered for ROE as prescribed by<br />
CERC. Incentives for better performing projects. Removal of cross subsidy payment for<br />
wheeling to third parties, determination of project specific pricing for large projects;<br />
allowing of 100% CDM benefits to generators atleast for 2 years; Payment by Letter of<br />
Credit and exit clause should be introduced to attract international developers. IDC<br />
should not be included in the project cost. If TNEB is charging evacuation charging, the<br />
wind tariff should not be Rs.3.40 per unit. Wind potential is not same in all areas.<br />
Thiru K.Venkatesh, M/s.Rajshree Sugars, Coimbatore<br />
The proposed order may be applicable from 15-05-2008. The projects<br />
commissioned prior to the proposed order and after the end of the control period should<br />
be treated as new projects for the purpose of fixing new tariff order.<br />
134
Thiru S.Gandhi, President, Power Engineers Society of India.<br />
Only 6 days are given for preparation of public hearing and the <strong>Tamil</strong> version of<br />
the consultative paper have not been posted in the Commission’s website. Wind power<br />
is infirm in nature and not facilitating TNEB, TNEB consolidate all kind of power and<br />
distribute. Regarding capital cost, it is on higher side and no evidence for fixing the<br />
capital cost is given. Cost of the WEG can not be more than 2 crores/ MW. WEGs are<br />
getting central subsidy and corporate tax benefits and hence there is no reason to fix a<br />
RoE of 17.63%. <strong>Electricity</strong> Act, 2003 does not permit banking and hence banking<br />
arrangement should not be given to the WEGs. TNEB has not made any study on the<br />
impact of TNEB grid due to 4200 MW WEGs because they are all inductive in nature. As<br />
per Europian standards the fault level in each feeder can not be more than 5%. But due<br />
to WEGs, the fault level is more. In the state of Kerala the tie feeders with the WEGs are<br />
directly connected to the bus bar of the substation. But in <strong>Tamil</strong> <strong>Nadu</strong> it is not so. There<br />
should be heavy penalty mechanism for VAR component injected into the grid. CUF<br />
should be arrived based on the machines commissioned in the last 3 years. The actual<br />
CUF in Theni area is around 37.5%. IDC should be charged with the promoters or the<br />
promoters themselves can lay the transmission line. No justification in waiving the cross<br />
subsidy and the poor people will get affected. Due to WEGs 36,000 acres of land is<br />
barren and there is no agricultural production in these lands. Consultative paper reflects<br />
the policy of privatizing the profits and socialize the losses.<br />
Thiru Siva Subramanian, Sakthi Sugars:-<br />
Very few plants came up after 15-05-2006. Two plants were commissioned in<br />
2007 & 2008. Escalation of expenditures after 2006 is high. We achieved less than 55%<br />
PLF in the past. For the existing projects capital cost may be revised to Rs.4.5<br />
crores/MW and the tariff may be reworked accordingly. We have spent around Rs.5.5<br />
crores for evacuation and this amount may be included in the capital cost. RoE of 15.5%<br />
post tax may be given as prescribed by CERC. This should translate into 20.771% pretax.<br />
TNEB is purchasing power at Rs.9 per unit and the co-generators are ready to<br />
supply at less than Rs.9 per unit.<br />
135
Thiru R.Varadarajan, DGM, DCW Ltd.<br />
The old projects should be included in the new tariff regime and the promoters<br />
are not getting payment from TNEB in time.<br />
Thiru A.Senthilkumar, M/s.TANFAC India Ltd.<br />
We have captive power plant based on waste heat recovery from chemical<br />
process. The tariff fixed by TNERC is only Rs.3.15 per unit. Since ours is a cogeneration<br />
plant, this should be treated on par with the bio-mass power plant. We are<br />
not able to make agreement with TNEB for sale of electricity since our consumption is<br />
less than 51%.<br />
Thiru N.Nagarajan, DGM(O&M), M/s.Subashree Bio energies (P) Ltd.<br />
We have biological biomass production and the plant is classified under biomass<br />
group. The capital cost is around Rs.11 crores per MW and the generation cost is<br />
Rs.10.50 per unit. The demand charges imposed should be waived. Charges may be<br />
levied under Tariff – I instead of Traiff – III in the case of drawal from TNEB.<br />
Dr.Rajapandian, Professor, Panimalar Engineering College.<br />
If there is more demand for the wind machines, cost will come down. The WEGs<br />
shall be allowed to realize the market price and should be allowed to sell any body.<br />
Thiru K.Periasamy, Director (Technical), M/s.Precision Equipments (P) Ltd.<br />
Bio-mass should not be encouraged as it affects the fertility of the top soil and<br />
agriculture productivity. Pumped storage power plant may be categorized under NCES<br />
as it reduces the peak load. Solar power plant can be encouraged only in the villages<br />
where standalone system is required. NCES sources shall be encouraged only when it is<br />
economically viable. Power Plants with de-salination shall also comes under NCES.<br />
Thiru K.Nagaraju, M/s.Lakshmi Electrical Control System Ltd.,<br />
Surplus units can be carry over to the next year to those people who have not<br />
signed agreement with TNEB. Adjustment of peak hour units to other slots should be<br />
allowed due to power cut.<br />
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Thiru M.P.Vasanth.<br />
The date of commissioning is not relevant since previously it was a single part<br />
tariff, but the proposed tariff is two part tariff and therefore the applicability is to be<br />
clearly spelt out. Agreement period is 20 years but the tariff is calculated based on the<br />
12 years.<br />
Thiru M.R.Krishnan, Consumrs Association of India.<br />
The time given by the Commission for public hearing is not sufficient for<br />
preparing the notes. Competitive bidding in procurement should be introduced.<br />
Commission can review the performances of service providers. Most of the assumptions<br />
in the consultative paper is based on the better parts of the other Commission reports.<br />
Using of Coal should not be allowed in bagasse based generation.<br />
Thiru V.Mageswaran, Unorganised workers federation<br />
Consumer burden should be reduced. Solar and wind energy should be<br />
promoted under public sector projects. Land is affected due to wind energy project.<br />
Thiru K.Vijayarajan, Director, M/s.ABI Energy Consultancy Service (P) Ltd.<br />
It is only after the year 2000, few projects have been registered for CDM benefits.<br />
Only the projects which requires financial additionality have been considered for CDM<br />
benefits. The transaction cost for getting CDM benefits is about 5 to 25% of the CERs.<br />
Thiru S.V.Angappan, GS, TNEB Accounts & Executive staff union.<br />
There is no evidence for the capital cost fixed by the Commission. TNEB does<br />
not have the capacity to buy the costly power. Tariff should be revised so that TNEB will<br />
have sufficient RoE. Banking shall be left to the decision between distribution licensee<br />
and WEGs.<br />
Thiru T.R.Krishnasamy, Director, Energreen Power Ltd.<br />
The capital cost of biomass gasification plant is high which is about Rs.7.5 crores<br />
/ MW. This should be bench marked . The cost of engine itself is more than Rs.3.5<br />
crores/MW. Commission should provide some incentive to encourage technological<br />
advancements. Evacuation shall be provided at 100 KW level in villages.<br />
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Thiru Yuvaraj, <strong>Tamil</strong> <strong>Nadu</strong> Farmers Sangam, Kumbakonam,<br />
Supply is not available even for 6 hours a day for agriculture purpose in last<br />
month in Tanjore area. At least 8 hours supply should be given to the agriculture sector.<br />
Farmers are not getting higher rate for bagasse. WEGs may be encouraged.<br />
List of Persons/Organization<br />
1. Thiru.V.Raghu, Secretary General, M/s.Indian Wind Power Association.<br />
2. Thiru.K.Venkatachalam, Chief Adviser to <strong>Tamil</strong> <strong>Nadu</strong> Spinning Mills Association.<br />
3. Thiru.Ajit Pandit appeared for M/s.Indian Wind Energy Association, M/s.Simran<br />
wind power and M/s Super wind Power.<br />
4. Thiru V.Thiagarajan, CMD, Thiruarooran Sugars.<br />
5. Thiru K.Raghunathan, MD, EID (P) ltd.<br />
6. Thiru N. Ramani, Indian Wind Turbine Manufacturers Association.<br />
7. Thiru K.Venkatesh, M/s.Rajshree Sugars, Coimbatore<br />
8. Thiru S.Gandhi, President, Power Engineers Society of India.<br />
9. Thiru Siva Subramanian, Sakthi Sugars<br />
10. Thiru R.Varadarajan, DGM, DCW Ltd.<br />
11. Thiru A.Senthilkumar, M/s.TANFAC India Ltd.<br />
12. Thiru N.Nagarajan, DGM(O&M), M/s.Subashree Bio energies (P) Ltd.<br />
13. Dr.Rajapandian, Professor, Panimalar Engineering College.<br />
14. Thiru K.Periasamy, Director (Technical), M/s.Precision Equipments (P) Ltd.<br />
15. Thiru K.Nagaraju, M/s.Lakshmi Electrical Control System Ltd.<br />
16. Thiru M.P.Vasanth.<br />
17. Thiru M.R.Krishnan, Consumrs Association of India.<br />
18. Thiru V.Mageswaran, Unorganised workers federation<br />
19. Thiru K.Vijayarajan, Director, M/s.ABI Energy Consultancy Service (P) Ltd.<br />
20. Thiru S.V.Angappan, GS, TNEB Accounts & Executive staff union.<br />
21. Thiru T.R.Krishnasamy, Director, Energreen Power Ltd.<br />
22. Thiru Yuvaraj, <strong>Tamil</strong> <strong>Nadu</strong> Farmers Sangam, Kumbakonam,<br />
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Annexure-VI<br />
SUMMARY OF COMMENTS RECEIVED FROM THE STAKE HOLDERS,<br />
ADVISORY COMMITTEE MEMBERS AND PUBLIC ON THE CONSULTATIVE<br />
PAPER CIRCULATED BY THE COMMISSION.<br />
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Annexure-VI<br />
SUMMARY OF COMMENTS RECEIVED FROM THE STAKE HOLDERS, ADVISORY<br />
COMMITTEE MEMBERS AND PUBLIC ON THE CONSULTATIVE PAPER<br />
CIRCULATED BY THE COMMISSION.<br />
1. TARIFF MECHANISM<br />
M/s Indian Wind Power Association: Time is not ripe enough for introducing<br />
competitive bidding even from the same type of non-conventional source. There is a risk<br />
of formation of a cartel and the price at which the generated power could be offered and<br />
could be much higher than the cost plus method.<br />
M/s Indian Wind Turbine Manufacturers Association: International experience of<br />
competitive bidding based procurement of renewable energy has not yielded favourable<br />
results. Experience of competitive bidding based procurement is not yet adequately<br />
established even in case of conventional technologies in the country with many power<br />
projects awarded through competitive bidding are yet to be commissioned. In view of the<br />
above, power procurement through competitive bidding route may not be an appropriate<br />
mechanism for promotion of renewable energy sources at this stage. Determination of<br />
project specific pricing for large projects should be introduced.<br />
M/s Indian Wind Energy Association: Power procurement through competitive bidding<br />
route may not be appropriate mechanism for promotion of renewable energy sources.<br />
Besides, unless guidelines for competitive bidding for renewable sources are notified by<br />
Central Government, the mechanism of ‘preferential tariff’ determination will have to<br />
continue. Commission may follow generalized approach for tariff determination since<br />
project specific tariff may give a scope for the utilities to sign PPAs on priority basis with<br />
those Wind developers of larger project size who have approved tariff on cost plus<br />
“project specific” basis. Besides distorting the market, this would lead to unnecessary<br />
confusion and risk among small potential investors.<br />
M/s Winwind Power Energy Private Limited: In the present market scenario, buyer of<br />
power would opt for the cheapest source and at present, wind power will not be able to<br />
140
compete in market with other conventional sources. Therefore, market determined<br />
pricing should not be adopted for wind power projects. In view of the short term support<br />
required by the industry and a strong energy support for the nation (as in Brazil), it will<br />
go a long way to keep preferential tariff for wind power for coming few years.<br />
Generalized tariff should be fixed for WEGs and project specific tariff orders can be<br />
considered for large wind farms.<br />
M/s.Super Wind Project Private Limited and M/s.Simran Wind Project Private<br />
Limited: Commission may consider determining the generating company specific order<br />
with a minimum installed capacity of 200-250 MW.<br />
M/s Rogini Mills: NCES can not compete with conventional sources in terms of cost of<br />
electricity and it may take some more time. Hence, wind energy procurement is to be<br />
made at preferential tariff.<br />
Thiru G Ramakrishnan: Most of the WEGs are erected by small and medium industrial<br />
developers in small capacities and the competitive bidding will not help them or the<br />
licensee to get competitive tariff.<br />
Power Engineers Society of <strong>Tamil</strong> <strong>Nadu</strong>: Bidding is the better process. Cost plus<br />
principle should be dropped. <strong>Tamil</strong> <strong>Nadu</strong> grid cannot accommodate anymore infirm<br />
generation. Promoting wind energy has lost its relevance in this State<br />
Thiru. K.Venkatesan, SAC Member: Location specific tariff may be adopted for larger<br />
capacity projects.<br />
Thiru. N.L.Rajah, SAC Member: The proposed cost plus tariff is not in line with the Act,<br />
National <strong>Electricity</strong> Policy and Tariff policy. This will not promote competition. Section 63<br />
of the Act and clause 6.4.2 of National <strong>Electricity</strong> Policy (NEP) stipulates such<br />
procurement by competitive bidding. Rajasthan has decided to go for competitive<br />
bidding from 31-03-2009. Section 62 of the Act specifies maximum and minimum price<br />
under shortage condition. Hence, considering the installed capacity in <strong>Tamil</strong> <strong>Nadu</strong>, we<br />
should go for competitive bidding with floor and ceiling rate of tariff.<br />
141
Thiru. V.Sethuraman, SAC Member: Tariff on cost plus will bring the capacity addition<br />
in the State. Once the TNEB is in comfortable position, competitive bidding can be<br />
introduced. Till then, cost plus approach can be adopted.<br />
Dr. M.Abdullah Khan, SAC Member: Preferential tariff can be given to the WEGs as<br />
per National Tariff Policy (NTP). There are problems in arriving at the tariff rate. Step by<br />
step approach may be introduced for competitive bidding. Market clearing price may be<br />
adopted even though more numbers of small players exist.<br />
Dr. U.Sankar, SAC Member: Competitive bidding will be useful since the WEGs are<br />
reluctant to reveal the true cost.<br />
Thiru. T.B.Chikkoba, SAC Member: Small WEGs will not come for competitive bidding<br />
due to higher cost for lack of economy of scale. <strong>Tamil</strong> <strong>Nadu</strong> does not have potential sites<br />
to put up more than 300 – 400 MW. WEGs can not come for competitive bidding since<br />
wind density varies from place to place. <strong>Tamil</strong> <strong>Nadu</strong> is in shortage of power and we need<br />
to develop wind projects. Lots of problems will arise in competitive bidding and hence<br />
suggested to continue the present policy.<br />
<strong>Tamil</strong> <strong>Nadu</strong> Energy Development Agency: Preferential tariff given at the beginning is<br />
acceptable. At present the WEGs are well established. It is to be seen whether TNEB<br />
can bear the burden of continuing the preferential treatment. The project specific tariff<br />
can be fixed if the tariff of specific project is lesser than the generalized tariff.<br />
Indian Renewable Energy Development Agency Limited: The <strong>Electricity</strong> Act, 2003<br />
stipulates competitive bidding in procurement of power. The government has not notified<br />
the standard bidding documents yet for procurement through competitive bidding for<br />
NCES power. Since the capital cost and cost of generation for WEGs are not<br />
competitive with the conventional generation plants, energy procurement should be done<br />
at preferential tariffs to encourage higher generation of wind power. We may look into<br />
the project specific tariff if there is any change in the policy at central level.<br />
Ministry of New and Renewable Energy: The competitive bidding in the advanced<br />
countries like U.K. is not successful. Preferential tariff is to be continued as<br />
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ecommended by the working group of FOR. Besides, unless guidelines for competitive<br />
bidding for renewable sources are notified by Central Government, the mechanism of<br />
preferential tariff determination may be continued. Commission may adopt a generalized<br />
approach for tariff determination on cost plus basis.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: Tariff determination based on competitive bidding is<br />
neither desirable nor justifiable since wind power is infirm power. Market determined<br />
pricing is not desirable now and may lead to a sort of lopsidedness in approach. Hence<br />
the regulatory price should be continued till the power position improves and a surplus<br />
situation prevails. Commission’s view of issuing a generalized tariff order for WEGs is<br />
acceptable. Further TNEB welcomed the cost plus tariff determination. Tariff for wind<br />
can only be single part. Base tariff with escalation approach is not acceptable.<br />
Thiru M.R.Krishnan, Consumrs Association of India.<br />
Competitive bidding in procurement may be introduced.<br />
Dr.Rajapandian, Professor, Panimalar Engineering College.<br />
The WEGs shall be allowed to realize the market price and should be allowed to sell any<br />
body.<br />
2. CAPITAL INVESTMENT<br />
M/s Indian Wind Power Association (IWPA): Recommended a simple average price of<br />
Rs. 6.00 crores per MW in their written comments and 6.25 crores in the SAC meeting.<br />
M/s <strong>Tamil</strong>nadu Spinning Mills Association (TASMA): Suggested a Capital cost of<br />
Rs.5.45 crores per MW.<br />
M/s Indian Wind Energy Association (InWEA): Indexing mechanism may be<br />
considered as specified by the Rajasthan <strong>Electricity</strong> <strong>Regulatory</strong> Commission as it<br />
automatically adjusts the cost with the change in underlying tariff parameters.<br />
Thiru G.Ramakrishnan, Chief Engineer (Rtd): The cost of Infrastructure Development<br />
Charges (IDC) of Rs.25 Lakhs may be added to the cost of WEGs and may be fixed as<br />
Rs.5.60 crores since the TNEB will not be in a position to lay the line required for<br />
evacuating energy generated by the WEG in time.<br />
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M/s Acciona Wind Energy Pvt. Ltd: Cost of modern large wind turbines is more than<br />
Rs.6.5 crores per MW.<br />
M/s Winwind Power Energy Private Limited: Present day capital investment cost for<br />
WEG is Rs. 7 Crores per MW<br />
M/s Indian Wind Turbine Manufacturers Association (IWTMA): A capital cost of<br />
Rs.6.05 Crores per MW is recommended. IDC should not be included in the project cost.<br />
If TNEB is charging evacuation charging, the wind tariff should not be Rs.3.40 per unit.<br />
Thiru Singhan Ragu: The advent of economic recession world over and the<br />
technological advancement in wind turbine, there exists every possibility that the capital<br />
cost of wind generation may come down.<br />
Power Engineers Society of <strong>Tamil</strong> <strong>Nadu</strong> (PESOT): If the cost plus principle is<br />
adopted, the capital cost shall be capped at Rs.4 crores per MW. During the public<br />
hearing, the president of the society stated that the capital cost is on the higher side and<br />
no evidence for fixing the capital cost is given. Cost of the WEG can not be more than 2<br />
crores per MW.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board (TNEB): Suggested a capital Cost of Rs.4 to 4.5 crores<br />
per MW and favoured indexing mechanism. TNEB requested break up details of the<br />
proposed capital cost and forming of an “Expert Committee” for determining the capital<br />
cost of the wind machine.<br />
Ministry of New and Renewable Energy (MNRE): A capital cost of Rs.5.5 to 5.7 crores<br />
per MW may be considered. The capital cost may be linked to indexing mechanism for<br />
provision of automatic revision of tariff. The break up details of the capital cost may be<br />
worked out as (i) land is 5%, plant and machinery is 85% and Civil works is 10%.<br />
Indian Renewable Energy Development Agency Limited (IREDA): The average<br />
project cost per MW is worked out to Rs.5.61 crores based on the 36 applications<br />
received at IREDA from April, 2007 to November, 2008 aggregating to 442.13 MW. Price<br />
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of the wind machine varies over time and therefore Commission can consider indexing<br />
option for determining the cost of wind machine. The cost of wind machine mainly<br />
depends upon the steel price in the market.<br />
Thiru. S.Mohan Verghese Chunkath, CMD, TEDA and SAC member: Indexing may<br />
be incorporated in fixing the cost of wind machine.<br />
Dr. U.Sankar, SAC member: Capital cost constitutes land, plant, machinery and civil<br />
works. Land cost is location specific and it is to be separated from project cost and there<br />
should not be any depreciation on land cost. The capital cost of thermal is comparatively<br />
low because of the variable cost involved and it is increasing. Therefore wind capital cost<br />
is high.<br />
Thiru. V.Sethuraman SAC member: The capital cost of thermal generation has gone<br />
up to 5 crores per MW for a capacity of 1000 MW station. Considering the smaller<br />
capacity of wind machine, the 5.35 crores per MW is not high. Commission can fix a<br />
scale or benchmark for capital cost of wind machine.<br />
Thiru. T.B.Chikkoba, SAC Member: The capital cost of the wind machine depends<br />
upon the manufacturer/supplier. The cost of the wind machine is determined by the<br />
market only and not determined by any other factor. The cost of wind machine is raised<br />
due to increase in demand. Only class B sites are available in <strong>Tamil</strong> <strong>Nadu</strong>.<br />
Manufacturers are not reducing the price even when steel and cement prices have<br />
comedown. Commission does not have authentic data about the cost of wind machines.<br />
As per the <strong>Electricity</strong> Act, 2003 Central <strong>Electricity</strong> Authority (CEA) has to get all the data<br />
and the same has to be published in the form of a book. Commission can fix the exact<br />
cost only if we have authentic data. Suppliers are not willing to share the cost details.<br />
Commission can request the capital cost from the suppliers/manufacturers/captive users<br />
and 5 crores per MW is reasonable.<br />
Thiru. S.Pancharathinam, SAC member: The basis for the proposed capital cost of<br />
5.35 crores per MW is to be given and it is on the higher side. The cement and steel<br />
prices have come down recently. Even TNEB’s thermal generation capital cost is around<br />
4 to 5 crores per MW and the proposed cost of wind machine is not acceptable.<br />
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Thiru. S.Rathinasabapathy, SAC member: The proposed capital cost is high. The basis<br />
for the proposed capital cost of Rs.5.60 crores may be furnished.<br />
Dr.Rajapandian, Professor, Panimalar Engineering College.<br />
If there is more demand for the wind machines, cost will come down. The WEGs shall be<br />
allowed to realize the market price and should be allowed to sell any body.<br />
Thiru S.V.Angappan, General Secretary, TNEB Accounts & Executive staff union.<br />
There is no evidence for the capital cost fixed by the Commission.<br />
3. CAPACITY UTILISATION FACTOR (CUF)<br />
M/s Indian Wind Power Association: The wind turbines have to be de-rated every year<br />
continuously. In 2007-08, the CUF has comedown to 10.79% from 17.27% in respect of<br />
99 wind mills in Muppandal area. The capacity utilization factor assumed by the<br />
Commission at 27.15% for determining the tariff is on a higher side. The potentially good<br />
windy sites have all been exhausted and the new windmills are getting installed in class<br />
‘C’ sites. The ‘A’ and ‘B’ class sites in <strong>Tamil</strong> <strong>Nadu</strong> are also yielding less because of over<br />
crowding and are comparable to the sites available elsewhere in the country. For<br />
instance, the CUF assumed in Gujarat is 23%, Madhya Pradesh is 22.5%, Maharashtra<br />
is 20%, and Rajasthan is 21 and 20%. Only Karnataka has assumed a higher CUF of<br />
26.5%. Further, CUF has to be determined not only based on sites but also taking into<br />
account the host of other factors like, the availability of evacuation infrastructure,<br />
demand for electricity as well as the mix of various sources. Therefore, the CUF could<br />
be considered at a lower level around 23% in <strong>Tamil</strong> <strong>Nadu</strong>. The Association<br />
recommended a CUF of 23 % and reported a de-rating of 7% in the last 3 – 4 years.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association: The main areas of consideration for<br />
determination of CUF are: (a) Wind availability (b) Grid availability and (c) Machine<br />
availability. Further, the grid availability has not been taken into consideration while<br />
assessing the CUF/PLF. The proven statistics of generation of units by each capacity<br />
wind turbine were analyzed and it gives an average of 21% of PLF/CUF only. Hence,<br />
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this needs to be revised from 27.15% to 21%. The Association recommended 22% CUF<br />
during the public hearing.<br />
M/s.Indian Wind Energy Association: In <strong>Tamil</strong> <strong>Nadu</strong>, the prominent wind sites have<br />
already been exhausted, leaving the wind sites which have weaker wind regime and<br />
requested the Hon’ble Commission to specify the Capacity Utilisation Factor after duly<br />
considering the actual CUF achieved by the wind projects commissioned after the<br />
issuance of May 15, 2006 <strong>Order</strong>. The Association recommended 26.5% CUF during the<br />
public hearing.<br />
M/s.Indian Wind Turbine Manufacturers Association: New wind projects in <strong>Tamil</strong><br />
<strong>Nadu</strong> will be in the balance class – II sites with low wind power density and hence lesser<br />
CUF shall be considered for tariff calculation.<br />
Thiru. T.B.Chikkoba, SAC Member: The data from which the CUF was calculated were<br />
not given in consultative paper. Last time CUF was calculated after getting data from C-<br />
WET. But this time the old method was not adopted. The proposed CUF of 27.15% is<br />
high since the wind potential areas were already utilized and only class C sites are<br />
available. De-rating factor can not be linked with wind availability. 1% reduction of derating<br />
after five years of operation is suggested.<br />
Power Engineers Society of <strong>Tamil</strong> <strong>Nadu</strong>: CUF should be arrived with the data<br />
collected after 2002. The society suggested during the public hearing that the CUF<br />
should be arrived based on the machines commissioned in the last 3 years and actual<br />
CUF in Theni area is around 37.5%.<br />
Ministry of New and Renewable Energy: The CUF may not be as higher as was<br />
analyzed by the Commission while issuing the earlier order. Requested the Commission<br />
to specify the CUF after duly considering the actual CUF achieved by the wind projects<br />
commissioned after the issuance of order No.3 <strong>dated</strong> 15-05-2006.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: The proposed CUF of 27.15% is acceptable.<br />
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4. DE-RATING FACTOR<br />
M/s.Indian Wind Power Association: The experience in running Wind Energy<br />
Generator has taught that the de-rating of the WEG be taken as 1/2 % (half percent) per<br />
year after 2 years.<br />
M/s.Indian Wind Turbine Manufacturers Association: De-rating factor should be<br />
atleast 1% in every 5 year of project life.<br />
M/s.Winwind Power Energy Private Limited: De-rating of CUF should not be<br />
considered as an alternative to time value of money. Reduction in CUF and time value of<br />
money operates in parallel and both need to be provided for. Further, de-rating of CUF<br />
@1% does not even come close to sufficiently cover for the inflation as this de-rating<br />
starts only from the 10 th year.<br />
Thiru G.Ramakrishnan: De-rating of CUF may be followed from 6 th year onwards as<br />
the generation is dependent upon the life of various critical components like gear box,<br />
roughness of the blade, life of electrical components due to constant switching<br />
operation, etc.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: De-rating factor is not allowed in case of thermal<br />
stations and the electrical characteristic for all type generators is same. CUF is based on<br />
wind velocity and may vary from year to year. As such average over a running period of<br />
every 5 years may be considered for adoption.<br />
5. RETURN ON EQUITY (ROE)<br />
M/s.Indian Wind Energy Association: RoE of 14% on post-tax basis does not really<br />
accord preferential treatment to renewable energy as enunciated in National Tariff<br />
Policy, as the RoE for conventional generation projects also stands at 14% on post-tax<br />
basis. Therefore a RoE of 16% on post-tax may be fixed. During the public hearing the<br />
association stated that 17.63% specified in the consultative paper is agreeable and the<br />
project may be exposed to 10 years MAT and 10 years corporate Tax.<br />
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M/s.Indian Wind Turbine Manufacturers Association: RoE should be 16% (Post-Tax)<br />
for preferential tariff. During the public hearing the association stated 15.5% post tax<br />
should be considered for ROE as prescribed by CERC.<br />
M/s.Winwind Power Energy Private Limited: In the present scenario, post tax returns<br />
of 14% will not attract customers to enter into a non-conventional area. Investor should<br />
get post tax returns at least 2% above the cost of funds. Considering average cost of<br />
funds at 13.5%, the returns should be considered at 15.5% post tax. A benefit of tax<br />
waiver for 10 years is available under Section 80IA of Income Tax Act, pre tax returns<br />
need not be calculated with current rate of income tax. Considering an average rate of<br />
22.17% tax on profits, pre tax returns of 19.73% needs to be taken.<br />
Thiru. T.B.Chikkoba, SAC Member: Older system of 16% post-tax may be followed.<br />
He suggested paying tax separately in addition to tariff rate by each WEGs.<br />
Thiru. V.Sethuraman, SAC Member: Suggested to adopt post-tax @ 15.5% as decided<br />
by CERC.<br />
Indian Renewable Energy Development Agency Limited: RoE of 14% is not<br />
preferential treatment. Like conventional project, RoE is not guaranteed in case of<br />
renewable project due to single part tariff. Hence, RoE for renewable projects should be<br />
at least on par with conventional projects.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: Allowing pre tax return to WEGs does not appear<br />
correct since the WEGs are allowed to setoff losses in other industry towards<br />
accelerated depreciation.<br />
Power Engineers Society of <strong>Tamil</strong> <strong>Nadu</strong>: WEGs are getting central subsidy and<br />
corporate tax benefits and hence there is no reason to fix a RoE of 17.63%.<br />
6. INTEREST ON DEBT<br />
M/s Indian Wind Power Association: It is not always possible to obtain financial<br />
assistance from IREDA only. The present rate on term loan from the banking system for<br />
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WEGs is in the range of 13-14% and Commission could consider an interest rate of<br />
13%. During the public hearing the association requested an Interest of 13% .<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association: In actual practice, IREDA is not able to<br />
provide debts for all the WTG owners. All the WEG owners have to approach only<br />
commercial banks for the purpose of loan. Hence, the interest cost on debts may be<br />
raised and fixed as 14% on an average instead of 12%. During the public hearing the<br />
association stated that loan tenure may be fixed at 7 years with one year moratorium<br />
period and interest on loan may be fixed at 13.5 %.<br />
M/s.Indian Wind Energy Association: The Hon’ble Commission can specify the<br />
indexing mechanism by linking it with the long term Prime Lending Rate (PLR) of State<br />
Bank of India. The Commission can specify the interest rate 200 basis point higher than<br />
the SBI long term PLR due to higher risk perceived by the lenders.<br />
M/s.Indian Wind Turbine Manufacturers Association: The interest rate should be<br />
minimum of 13% and the term of loan should be 7 years.<br />
M/s.Winwind Power Energy Private Limited: Only a small proportion of investors avail<br />
loan from IREDA and a major debt funding comes from various nationalized and private<br />
sector banks. IREDA provides funding at a discounted rate, which is not the case with<br />
other financing institutions. Therefore considering the PLRs of various banks and a<br />
premium of 50 basis points should be applied on average PLR for wind power project<br />
funding which is worked out to 13.50%. Further the term of loan offered by IREDA is not<br />
the industry benchmark and banks do not provide loans for such a higher term.<br />
Therefore term of loan should be taken at 5 years, with one year moratorium.<br />
M/s.Sri Amaravathi Spinning Mills: The interest rate of 12% on non renewable energy<br />
projects is not good enough to lure investors in such projects and this should be pegged<br />
at 5% per annum. Further, there should be subsidy from the Government if the interest<br />
rate exceeds 9% per annum.<br />
Indian Renewable Energy Development Agency Limited: State Bank of India’s (SBI)<br />
long term Prime Lending Rate (PLR) with 2% additional interest rate may be adopted in<br />
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future. Present SBI PLR rate is 11.75%. The interest rate of IREDA varies from 11.75%<br />
to 12.9%. In last 21 years IREDA rate was revised once in a year only. But in the last six<br />
months, the interest rate was revised 4 times. But banks revised interest rate only once<br />
in last year.<br />
Ministry of New and Renewable Energy: Commission can specify the suitable<br />
mechanism that could automatically address the issue of variation in interest rate in<br />
future and requirement of review of tariff order should not arise.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: Reserve Bank of India has taken efforts to reduce the<br />
interest rate charged by the financial institutions. The rate of interest rate offered to the<br />
NCES sources should be less than the market rate prevailing from time to time. Hence,<br />
the suggested rate of 12% is not acceptable and interest rate of 9% to 10% may be<br />
considered. Further, increasing the loan tenure to 15 years can be considered.<br />
CMD, TEDA, SAC Member: The loan quantity offered by IREDA is small. Therefore<br />
bank rate is good.<br />
7. OPERATION AND MAINTENANCE EXPENSES<br />
M/s.Indian Wind Power Association: O&M expenses considered by the Hon’ble<br />
Commission during the previous order were based on the position obtained in the year<br />
2006. However, more than two and a half years have since passed and these expenses<br />
have almost doubled since then. Therefore, assuming the same level as fixed by the<br />
Commission in May 2006 may not be appropriate, considering the escalation in prices of<br />
almost all the parts. Hence, O&M expenses could be fixed at 1.8% of the capital cost for<br />
the first five years and escalation of 5% every year thereafter. During the public hearing<br />
the association requested an O&M expenses of 1.80% for 2 years with 5% escalation<br />
per annum. The O&M charges has increased to 21 paise per unit and requested to<br />
follow the Maharashtra model of wind tariff determination.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association: For a machine of 1.25 MW, the capital<br />
cost has come earlier to Rs.5.91 Crores. For such a machine of this capacity, the<br />
manufacturer charges Rs.10 lacs as annual O & M charges. This comes close to<br />
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1.69% and therefore, considering the revised capital cost now enhanced, the O & M<br />
charges should be fixed at the rate of 1.70% at least. Even though, the insurance<br />
charges are fixed as 0.5%, the wind turbine owners are supposed to take additional<br />
insurance policies besides break down policies, etc. Hence, this cannot be a criterion to<br />
lower the O & M cost. During the public hearing the association the association stated<br />
that the actual O&M cost is around 1.89%. Commission may consider 1.69% of capital<br />
cost as O&M with the escalation prevailing in the market.<br />
M/s.Indian Wind Energy Association: There has been significant increase in<br />
Consumer Price Index (CPI) and Wholesale Price Index (WPI) on year-on-year basis<br />
and the CAGR correspond to around 5%. Therefore, Hon’ble Commission may kindly<br />
consider the O&M Cost for first year as 1.1% of the project cost with annual escalation of<br />
5% for tariff determination from second year onwards.<br />
M/s.Indian Wind Turbine Manufacturers Association: There should be an escalation<br />
of 5% every year on account of inflation.<br />
M/s.Acciona Wind Energy Pvt. Ltd.: The actual O&M cost is atleast 2% of the capital<br />
cost with an escalation of 5% every year. Provision of 5% of the capital cost needs to be<br />
made every 5 years towards replacement and / or repair of large components.<br />
M/s.Winwind Power Energy Private Limited:- Rs.12 Lakhs per annum per MW<br />
towards O&M expenses is suggested. The escalation of 5% should start from the<br />
second year itself.<br />
M/s.Sri Amaravathi Spinning Mills: O&M charges of 1.1% for the first 5 years should<br />
be made applicable to the existing WEGs also.<br />
Thiru. T.B.Chikkoba, SAC Member: The capital cost for the wind energy project<br />
considered in Maharashtra ERC is only 4 crores per MW and hence higher O&M is<br />
reasonable. But in the proposed tariff the capital cost considered is more and hence the<br />
proposed rate of O&M is reasonable. The changes in O&M suggested by TNEB are very<br />
small amount and it is suggested not to change. It is more reasonable to have a stable<br />
formula.<br />
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Thiru G.Ramakrishnan: Normally no O&M charge is collected in the first year when the<br />
WEG is under warranty period. Hence, the O&M charge may be collected from second<br />
year and the same may be increased at 5% from third year onwards as per CERC<br />
norms applicable to thermal and hydro generating stations.<br />
Thiru. S.Pancharathinam, SAC Member: TNEB’s suggestion of calculation of O&M on<br />
the percentage of machinery instead of capital cost may be adopted.<br />
Ministry of New and Renewable Energy: 85% of the capital cost can be considered for<br />
O&M calculation since O&M is related to machinery only.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: O&M calculation may be charged on the cost of<br />
machinery instead of the capital cost of the project. The O&M charges of 1.1% of the<br />
capital cost exclusive of insurance charges are acceptable. However, the percentage to<br />
be applied for O&M calculation may be charged to the cost of the machinery instead of<br />
the capital cost of the projects.<br />
8. DEPRECIATION<br />
M/s.Acciona Wind Energy Pvt. Ltd.: A residual value higher than 2% of the capital cost<br />
is not possible to be realized and the depreciation rate should be 4.9%.<br />
M/s.Winwind Power Energy Private Limited: Considering the residual value of WEG<br />
as zero at the end of 20 years, SLM depreciation rate of 5% should be adopted.<br />
Thiru. V.Sethuraman, SAC Member: Proposed rate of 4.5% is correct and acceptable.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: The suggested depreciation rate of 4.5% is acceptable.<br />
9. INSURANCE CHARGES<br />
M/s.Indian Wind Power Association: Insurance premium needs to be worked out<br />
taking into account the replacement value and not just the depreciated value. Insurance<br />
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charges could be fixed at a level of 0.75% of the replacement value in the first year and<br />
with a possible increase of 5% every year thereafter. Similar views expressed by the<br />
association in the public hearing.<br />
M/s.Rogini Mills: During the initial years no insurance company either nationalized or<br />
private are having proper machinery breakdown policies as far as Wind Turbine<br />
Generators are concerned.<br />
Thiru. S.Rathinasabapathy and Thiru. S.Pancharathinam, SAC Members: Only<br />
machine cost shall be included for insurance calculation as suggested by TNEB.<br />
Indian Renewable Energy Development Agency Limited: May be considered based<br />
on the market practices.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: The proposed rate of insurance charges is acceptable to<br />
TNEB. However, the percentage to be applied for insurance calculation may be charged<br />
to the cost of the machinery instead of the capital cost of the projects.<br />
10. TIME VALUE OF MONEY<br />
M/s.Indian Wind Power Association: When tariff is being fixed for a period of twenty<br />
years, the purchasing power of rupee would have eroded substantially when the inflation<br />
in our country has been in the range of 6 to 12%. Time value of money needs to be<br />
factored in while arriving at the uniform tariff for a period of 20 years. Alternatively, the<br />
Maharashtra model of an annual escalation in tariff could be announced with 9 paise per<br />
year escalation which would take care of the erosion in the purchasing power.<br />
M/s.Indian Wind Energy Association: Hon’ble Commission should specify the tariff<br />
after considering the time value of money and actual cash flow requirement of the<br />
developer in initial years, either by way of specifying the front loaded declining tariff or<br />
levellised tariff for 20 years of project life.<br />
M/s.Winwind Power Energy Private Limited: Tariff should be progressive, reflecting<br />
the growth in economy and corresponding prices and the concept of time value of<br />
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money should be followed in the tariff determination. Rs. 3.74 per unit would be the right<br />
metric.<br />
11. WORKING CAPITAL REQUIREMENT<br />
M/s.Indian Wind Energy Association: Commission has not considered the working<br />
capital requirement but the wind project requires working capital in the form of operation<br />
and maintenance expenses and receivables for running their routine business activities.<br />
Further, Karnataka and Rajasthan ERCs have considered the working capital<br />
requirement in wind tariff calculation. Therefore, Commission may consider the Interest<br />
on working capital at the interest rate equivalent to State Bank of India, and the working<br />
capital requirement equivalent to one month of O&M expenses and one and half months<br />
receivables, for determination of tariff for wind energy projects.<br />
12. TARIFF RATE<br />
M/s.Indian Wind Power Association: Tariff rate for group 1 and group 2 WEGs have to<br />
be revised due to increase in de-rating factor and O&M cost. Thanked the commission<br />
for coming up to a level of Rs.3.40 per unit but requested revising the tariff to Rs.3.90<br />
per unit with 9 paise annual escalation for 20 years. The tariff proposed in the<br />
consultative paper will not even cover the interest cost which works out to Rs.3.90 per<br />
unit. With the quality of power being the same, fixing different tariff for different WEGs on<br />
the basis of date of commissioning is contrary to and denying equality before law.<br />
Similar views are expressed in the public hearing.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association: All older machines commissioned prior to<br />
15.05.2006 and after 15.05.2006 should also be taken care on the reworking of the<br />
purchase price. During the public hearing the association requested that the tariff for<br />
group1, group2 and proposed WEGs may be fixed at Rs.3/- , Rs.3.20/- and Rs.3.40<br />
respectively.<br />
M/s.Indian Wind Turbine Manufacturers Association: Base tariff may be arrived<br />
taking into account the existing financial parameters and escalating it every year as<br />
prescribed by the Maharashtra <strong>Electricity</strong> <strong>Regulatory</strong> Commission.<br />
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M/s.Acciona Wind Energy Pvt. Ltd.: The tariff rate should be of Rs.3.40 per kWh with<br />
annual escalation of 1.75% each year or Rs.4 per kWh fixed for 20 years.<br />
M/s.Winwind Power Energy Private Limited: Tariff rate shall be of Rs.4.60 per kWh<br />
with 2.5% escalation every year.<br />
M/s.Arvinth Hospital: The new rate of purchase should be uniform irrespective of the<br />
date of commissioning of the WEGs<br />
Thiru S.Kittu, Tiruppur: Tariff of Rs.3.40 per unit should be given to all existing WEGs<br />
also. Further, a special incentive should be provided for the existing old machines due to<br />
their old technology.<br />
M/s.Vairam Wind Power: The new rate of purchase should be uniform irrespective of<br />
the date of commissioning of the WEGs.<br />
M/s.Rogini Mills: The tariff rate shall be escalated every year for 20 years as has been<br />
done in Maharashtra.<br />
Thiru. K.Venkatesan, SAC Member: Tariff for Group 1 and Group 2 should not be<br />
revised. Further, if the capital cost is decreased whether the WEGs can accept<br />
downward revision of tariff?<br />
Thiru. T.B.Chikkoba, SAC Member: The matter of considering the time value of money<br />
for the wind tariff is pending before the court of law. Hence it need not be considered<br />
now.<br />
Power Engineers Society of <strong>Tamil</strong> <strong>Nadu</strong>: The price of Rs.2.20 per unit being<br />
equivalent to gas power station is reasonable as procurement price.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: The policy directives of Government of <strong>Tamil</strong> <strong>Nadu</strong><br />
(GoTN) such as provisions of power security to weaker sections and agricultural sectors<br />
shall also be kept in view in tariff determination process. Further, the existing tariff for<br />
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group 1 and group 2 WEGs is hold good and for the new WEGs, a tariff rate of Rs.3.00<br />
per unit will hold good duly freezing the various parameters as suggested by TNEB.<br />
Levelised tariff is preferred than the average tariff to avoid future litigation on this issue.<br />
13. APPLICABILITY OF THE PROPOSED ORDER<br />
Thiru G.Ramakrishnan: New tariff order shall be applicable to WEGs commissioned on<br />
or after this date irrespective of whether tie up approval or agreement is executed<br />
between the WEGs and Distribution Licensees before this date.<br />
14. CONTROL PERIOD<br />
M/s.Indian Wind Power Association: Commission could specify control period of 2<br />
years. Commission may clarify that the new Control Period shall be effective from<br />
September 20, 2008, the date of passing the order for curtailing the control period<br />
specified in the <strong>Order</strong> No. 3 <strong>dated</strong> 15-05-2006.<br />
M/s.Acciona Wind Energy Pvt. Ltd.: Regarding the control period, the approach taken<br />
by Maharashtra ERC may be taken, which says that a review of the base tariff for wind<br />
energy should be done every year that considers prevailing conditions in the market.<br />
M/s.Winwind Power Energy Private Limited: Base tariff should be arrived and should<br />
be escalated every year for 20 years. This will ensure that all investors get reasonable<br />
returns close to the ongoing rates, considering time value of money and inflation.<br />
M/s.Super Wind Project Private Limited and M/s.Simran Wind Project Private<br />
Limited: Commission in its order <strong>dated</strong> 19-09-2008, against the petitions M.P. Nos. 9,<br />
14 and 23 of 2008 filed by M/s. InWEA and others passed the order that the control<br />
period of three years as specified in order no. 3 <strong>dated</strong> 15-05-2006 is waived from the<br />
date of issue of the order. Hence, the new control period should be commenced from 19-<br />
09-2008.<br />
Indian Renewable Energy Development Agency Limited: Due to volatility in capital<br />
costs, control period may be reduced from 3 years to 2 years.<br />
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Ministry of New and Renewable Energy: Commission may specify the control period<br />
of 2 years and Commission may clarify whether the new control period shall be effective<br />
from 20-09-2008, the date of passing the order for curtailing the control period specified<br />
in the order No.3 <strong>dated</strong> 15-05-2006.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: As per the section 10.2 of TNERC order No.3 <strong>dated</strong> 15-<br />
05-2006, the revisions made by the Commission after the control period will be binding<br />
on the new generators who have started generating after issue of revised order. TNEB<br />
agrees with the proposal of revising the control period from 3 to 2 years but request the<br />
Commission to revive the control period of 3 years.<br />
Thiru. S.Mohan Verghese Chunkath, CMD, TEDA and SAC member: For wind, the<br />
change in control period does not make much difference.<br />
Thiru.Ajit Pandit, IWEA<br />
The Control period of 2 year specified in the consultative paper is agreeable. Control<br />
period was waived on 19-09-2008, the new order should have retrospective effect from<br />
that date otherwise there will be <strong>Regulatory</strong> vacuum for the intermediate period.<br />
IWTMA:The 3 years control period should be reduced from the date it was announced.<br />
The effective date for the new tariff should be either from 15 th May, 2008 or 19 th<br />
September, 2008.<br />
Thiru R.Varadarajan, DGM, DCW Ltd.<br />
The old projects should be included in the new tariff regime and the promoters are not<br />
getting payment from TNEB in time.<br />
15. MINIMUM PURCHASE REQUIREMENT<br />
M/s.Indian Wind Power Association: If we fix minimum percentage of Renewable<br />
Purchase Obligation (RPO), there will not be any incentive for growth. The Gujarath<br />
ERC has fixed RPO of 2%. If we fix a lower percentage like this, distribution licensee will<br />
say that wind power will not be purchased beyond that limit. Such case should not<br />
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happen in <strong>Tamil</strong> <strong>Nadu</strong>. Hence, it should be at least 15%. Commission could fix 15% as<br />
minimum percentage of power to be procured from renewable sources of energy out of<br />
the total consumption of electricity with the provision that the entire energy produced<br />
from renewable sources should be accepted. There is no need for fixing source wise<br />
quota.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association: Minimum purchase requirement should<br />
not include the captive consumption or third party sale of wind energy. Captive<br />
consumption is for a separate purpose and therefore, it cannot fall under Section 86(1)<br />
(e) of The <strong>Electricity</strong> Act, 2003, which specifically deals with the purchase alone and not<br />
with the captive consumption. Barring the captive consumption percentage, the Hon’ble<br />
Commission may retain or increase the 10% exclusively for sale/purchase category<br />
alone and even by barring the third party sale if any.<br />
M/s.Indian Wind Energy Association: National Tariff Policy stipulates that the<br />
appropriate Commission to specify ‘minimum percentage’ for power purchase from<br />
renewable energy sources only. In view of the above, Hon’ble Commission to specify<br />
only minimum percentage for power purchase from renewable energy sources. No<br />
restrictions in terms of internal percentages amongst RE is desirable. The minimum<br />
purchase specification of 10% should be continued during the next control period.<br />
Hon’ble Commission may extend the applicability of ‘minimum percentage’ specification<br />
for renewable energy procurement to ‘open access consumers’ and ‘captive consumers’<br />
apart from distribution licensees, to the extent of the consumption outsourced from such<br />
sources. Further, it may be worthwhile to look at an alternate approach of RPO through<br />
‘Renewable Energy Certificate’ (RE Certificate) method for compliance, as against the<br />
currently operational ‘contract path method’. The same method would also be very<br />
beneficial, should there emerge a unified electricity market across the country in the<br />
coming years. Further, the RE certificate system would have a component of ‘price<br />
discovery’ of RE based energy, and hence, possible to move towards market determined<br />
pricing mechanism. The association stated in the public hearing that for the RPO there is<br />
no maximum limit mentioned in NTP, trajectory kind of target may be fixed.<br />
M/s.Indian Wind Turbine Manufacturers Association: 15% minimum purchase<br />
obligation will solve the purpose and will boost the capacity addition sufficiently.<br />
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M/s.Acciona Wind Energy Pvt. Ltd.: Minimum purchase requirement by the distribution<br />
licensee should be 10% and the purchase should relate to the total of all NCES power<br />
put together rather than being split category wise.<br />
M/s.Winwind Power Energy Private Limited: It is important to fix a minimum purchase<br />
requirement for NCES, as well as for wind power to attain at a right energy mix and at<br />
the same time, it is also true that penetration of wind power beyond a certain limit may<br />
affect the grid stability. Hence, both minimum and maximum limits should be prescribed<br />
for sourcing energy from wind power. At present, wind power contributes approximately<br />
10% of the total electricity consumption of the State. In order to promote further<br />
investment, the minimum purchase requirement for wind power should be at 12.50%.<br />
Thiru. K.Venkatesan, SAC Member: In <strong>Tamil</strong> <strong>Nadu</strong> we are in deficit and for NCES<br />
there is no backing down. Therefore, is it necessary to fix minimum percentage for<br />
RPO? Minimum percentage may be fixed but it should be reasonable.<br />
Thiru. T.B.Chikkoba, SAC Member: Captive consumption should be included in RPO<br />
to find out the real consumption of NCES and to find out the energy mix. The RPO<br />
should be increased to minimum of 15%.<br />
Thiru. N.L.Rajah, SAC Member: Fix a minimum percentage of RPO at more than 10%.<br />
Thiru. V.Sethuraman, SAC Member: Captive consumption shall not be taken into<br />
account for fixing RPO. Standby generation should not be included in calculating RPO.<br />
Indian Renewable Energy Development Agency Limited: Wind power should be<br />
utilized to the maximum possible extent since it is based on the natural resources.<br />
Ministry of New and Renewable Energy: Principles adopted by the FOR working<br />
group may be considered on the issue of maximum/minimum purchase specification.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: Minimum off take to be specified by the Hon’ble<br />
Commission could be inclusive of the wheeled energy and inclusive of all NCES<br />
sources. Existing ceiling of 10% may be retained for the current control period also and<br />
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absorbing the excess energy above 10% has to be left to the discretion of the TNEB.<br />
While minimum percentage is fixed on quantum of wind energy, maximum percentage<br />
(around 30%) on installed capacity is to be fixed in order to facilitate grid management.<br />
In any power supply management system, the penetration of infirm power cannot be<br />
more than 10 to 12%. No distribution arrangements could be established based on the<br />
40% supply of infirm and uncertain power.<br />
16. EVACUATION FACILITIES<br />
M/s.Indian Wind Power Association: The wind sector in <strong>Tamil</strong> <strong>Nadu</strong> has suffered<br />
during the previous years for want of adequate evacuation infrastructure. There has<br />
been a loss of almost 30-40% of possible generation on this count alone. During the<br />
year 2008, evacuation infrastructure of M/s Power Grid Corporation of India Ltd., was<br />
used, which has been created to evacuate the power generated from the Koodankulam<br />
Nuclear Power Station. Once the Koodankulam Station starts generating to its capacity,<br />
this facility may not be available for evacuation of wind power. Commission may direct<br />
TNEB to create its own evacuation facility so that the 100% wind power can be<br />
evacuated in future. Further, creation of any additional infrastructure should take into<br />
account the future growth envisaged in the sector rather than confining to then present<br />
existing capacity.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association:TNEB has not yet complied the order no.3<br />
<strong>dated</strong> 15-05-2006 on the aspect of evacuation and requested each unit produced by<br />
wind generators should be evacuated without any exception.<br />
M/s.Indian Wind Turbine Manufacturers Association: Commission may direct TNEB<br />
for submitting every year a time bound plan for system augmentation and grid<br />
strengthening based on the proposed wind sites. Further, the interconnection point is not<br />
defined in NCES Regulation. In practice, an interconnection point can be a line (LILO<br />
arrangement) or can be HV side (or LV side) of substation.<br />
M/s.Acciona Wind Energy Pvt. Ltd.: The STU/ Distribution Licensee should bear the<br />
cost of interfacing line till the interfacing point for the wind power projects irrespective of<br />
whether the wind farm investor sells the entire generated electricity to the distribution<br />
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licensee or to 3 rd parties since the generator is contributing to reduce the huge energy<br />
deficit in the State.<br />
Power Engineers society of <strong>Tamil</strong> <strong>Nadu</strong>: IDC should be charged with the promoters<br />
or the promoters themselves can lay the transmission line.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: In the absence of collection of IDC, it may not be<br />
possible for TNEB to provide the required evacuation on priority basis within the annual<br />
plan. In case collection of IDC is permitted, then TNEB may consider allotment of power<br />
transformer to the evacuation arrangement on priority basis from their general pool. The<br />
evacuation / transmission capacities created for wind power will be utilized partially and<br />
it may have to be examined as to whether such investments for such partial utilization<br />
could be affordable.<br />
17. METERING AND COMMUNICATION<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association: As per the regulation 8 (1) and (9) of the<br />
<strong>Electricity</strong> Supply Code, 2004, it is the obligation of TNEB to provide a meter card at the<br />
wind mill site like one maintained by TNEB. But in actual practice, no such arrangement<br />
has been made available at the wind mill site. Commission can order TNEB to provide<br />
meter card to the WEGs.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: WEGs are also may be brought under the umbrella of<br />
Availability Based Tariff mechanism and the Commission may examine and order<br />
accordingly.<br />
18. PAYMENT OF SECURITY TO THE WEGS<br />
M/s.Indian Wind Power Association: Even though this clause is incorporated in EPA,<br />
this is not being followed by TNEB. TNEB takes 5 months for making the payment.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association: Even though, the earlier <strong>Order</strong> No.3 <strong>dated</strong><br />
15.05.2006 specifically provides enough scope on this aspect, nothing was materialized<br />
till to-day. However, the same can be reiterated with a specific time bound action plan.<br />
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<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: The bankable security in favour of the generator need<br />
not be insisted and this may be deleted<br />
19 BILLING AND PAYMENT PROCEDURE<br />
M/s.Indian Wind Power Association: Current provision of making payment to the<br />
generators may be retained. Commission should prescribe penal charges for non<br />
payment to the generators on due date and this should be made automatic. Commission<br />
could fix the penal charge at the same rate at which the distribution licensee has been<br />
collecting penal charges from HT consumers for non payment of bills. TNEB takes 5<br />
months for making the payment. Rebate for payment made within 15 days shall be<br />
as in Gujarath ; BPSC for payment made over 15 days shall be charged at SBI<br />
PLR.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association: Delay of more than 2 months is occurring<br />
in every payment by TNEB. Hence, this provision should be more specific with an action<br />
plan.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: NLC and NTPC are offering 30 days time to TNEB for<br />
payment of their monthly energy bills. Commission may also consider the period of 30<br />
days for the payment of the wind energy bills in view of the processing time required at<br />
the circle offices for payment to WEGs.<br />
Indian Renewable Energy Development Agency: Present practice of raising the bill<br />
after accounting for generation and consumption at the end of each monthly billing cycle<br />
subject to recovery of transmission and wheeling charges may be continued.<br />
M/s Indian Wind Turbine Manufactures Association: Payment by Letter of Credit and<br />
exit clause should be introduced to attract international developers.<br />
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20. CLEAN DEVELOPMENT MECHANISM (CDM)<br />
M/s Indian Wind Power Association: For successful registration of the project one has<br />
to prove that without CDM benefits the investments in wind power projects are not viable<br />
at all. Under the above circumstances, if the investors are asked to share the benefit<br />
from CDM with the STU and Distribution Licensee, it will only prove that the investments<br />
in WEGs are otherwise profitable and that the benefit coming out of the CDM is only<br />
additional to the normal profit that is being earned. This will send a wrong signal to the<br />
Executive Board of UNFCCC and the probability of the Indian wind sector projects<br />
getting registered will further reduce. Further, with the current recessionary trend being<br />
faced globally, the prices of CERs have also come down significantly. Sharing the CDM<br />
benefits with TNEB would shut the door for CDM benefits in <strong>Tamil</strong> <strong>Nadu</strong>. If Commission<br />
imposes sharing of CDM benefits with the licensee, the promoter will not get any CDM<br />
benefits.<br />
M/s <strong>Tamil</strong>nadu Spinning Mills Association: The question of sharing with others will<br />
arise, only when the other person is having a clear stake on the project. Only when the<br />
WEG proves that without CDM revenue, the whole project is not viable, it can be<br />
considered for CDM revenues. TNEB is not investing anything on the WEG on its own<br />
and therefore, it cannot be a stake holder and hence, the rationality to claim a share in<br />
the revenue alone is not a good ethical factor. The projects will get CDM benefits only if<br />
there is any viability gap. Hence, there shall not be any sharing of CDM benefits and it<br />
may be given to the Generators in full.<br />
M/s Indian Wind Energy Association: The Hon’ble Commission should limit the CDM<br />
sharing between the developer and the licensee on 75:25 basis as being followed in<br />
Gujarath and Rajasthan.<br />
M/s Indian Wind Turbine Manufacturers Association: CDM benefit should only go to<br />
the investors. Allowing of 100% CDM benefits to generators atleast for 2 years may be<br />
considered.<br />
M/s Acciona Wind Energy Pvt. Ltd.: 50% sharing of the CDM benefits with the State<br />
utility is not acceptable because WEGs are only taking risk in developing the projects.<br />
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M/s Winwind Power Energy Private Limited: The full benefit of CDM revenue should<br />
be allowed to be retained by investor as being the case with most of the other States.<br />
M/s Rogini Mills: Demanding the share of CDM benefits by TNEB is not correct.<br />
M/s Sri Amaravathi Spinning Mills: The sharing of CDM benefits at 50:50 ratio with<br />
TNEB will dampen the spirit of the potential investors.<br />
Thiru. T.B.Chikkoba, SAC member: Distribution licensee does not play role in getting<br />
CDM benefits. The full benefits should go to WEGs only.<br />
Dr. U.Sankar, SAC member: If only 4% of the projects get CDM benefits, it seems<br />
something is wrong in the approach in getting the CDM benefits.<br />
Dr. M.Abdullah Khan, SAC member: The CDM benefits should be shared between the<br />
promoters and the TNEB.<br />
Thiru.S.V.Balasubramaniam, SAC member: Getting CDM benefits is not an easy job<br />
and the promoters have to engage experts for availing CDM benefits. Getting CDM<br />
benefits will take 1 to 2 years. Further, all WEGs will not get CDM benefits and therefore<br />
the option of sharing CDM benefits should be left to the WEGs. If the CDM benefits are<br />
shared with TNEB, the distribution licensee could blame the WEGs in a later date for<br />
selling the CERs at lower rate.<br />
Ministry of New and Renewable Energy: Lot of efforts are required from promoter side<br />
to get the CDM benefits. That is why FOR recommended higher percentage of CDM<br />
benefits to the promoter in the initial 5 years. The principles adopted by the FOR working<br />
group may be considered on the issue of sharing CDM benefits between the licensee<br />
and the promoter.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: Already RoE is assured to WEGs and therefore CDM<br />
benefits should be shared by WEGs with TNEB.<br />
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Thiru K.Vijayarajan, Director, M/s.ABI Energy Consultancy Service (P) Ltd.<br />
It is only after the year 2000, few projects have been registered for CDM benefits. Only<br />
the projects which requires financial additionality have been considered for CDM<br />
benefits. The transaction cost for getting CDM benefits is about 5 to 25% of the CERs.<br />
21. REACTIVE POWER CHARGES<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association: Reactive power charges already fixed are<br />
little high and may be reduced to 10 paise and 20 paise from 25 paise and 50 paise<br />
respectively.<br />
M/s.Acciona Wind Energy Pvt. Ltd.: Existing reactive energy charges should be<br />
reduced in line with the other States.<br />
M/s.Winwind Power Energy Private Limited: Agreed with the reactive power charges<br />
proposed in this Consultative Paper in the best interest of the industry.<br />
M/s.Sri Amaravathi Spinning Mills: Reactive power charges can be reduced from 25<br />
and 50 paise per kVARh to 10 and 25 paise per kVARh respectively.<br />
Thiru. T.B.Chikkoba, SAC Member: The reactive power charges for WEGs are more<br />
when compared to the charges in respect of bio-mass/cogenerations.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: Proposal indicated in the consultative paper may be<br />
continued.<br />
Thiru S.Gandhi, Power Engineers Society of <strong>Tamil</strong> <strong>Nadu</strong>: There should be heavy<br />
penalty mechanism for VAR component injected into the grid.<br />
22. ENERGY PURCHASE AGREEMENT<br />
M/s.Indian Wind Power Association: The WEGs will not go out of business and hence<br />
the TNEB transmission assets will not be idle. The draft of the agreement should be<br />
discussed with the investors, who is also a signatory to the agreement and the benefits<br />
intended to be passed on to the investors should be available from the date of the order<br />
itself rather than linking it to the date of entering into a new agreement. Further, there<br />
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could be an exit clause in the agreement after giving three months notice by either party<br />
and there should not be any penalty associated with it.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association: The draft EPA as already proposed in<br />
order no.3 <strong>dated</strong> 15.05.2006 of the Hon’ble Commission was not made available to the<br />
comments of the stake holders and requested that more comments could be invited if<br />
the exact text of the EPA is made available to the stake holders.<br />
M/s.Indian Wind Turbine Manufacturers Association: In case of a wind project, most<br />
of the cash outflows are there at the initial stages of project (Planning and construction).<br />
The possibility of winding up a capital intensive project with high debt value does not<br />
arise except in some extraordinary conditions. In view of the above, the clause for<br />
penalty is not required.<br />
M/s.Acciona Wind Energy Pvt. Ltd.: There need not be any penalty for terminating the<br />
PPA with the STU and /or Distribution Licensee provided a 3 months notice period is<br />
served by the WEGs. However, STU and/or the Distribution Licensee should not be<br />
allowed to terminate the PPA under any circumstances since there would be a negative<br />
outlook by the financial institutions providing the long term debt financing and thereby<br />
financing the wind power projects would become difficult.<br />
M/s.Winwind Power Energy Private Limited: TNEB should not be allowed to break out<br />
of the PPA. Developer should be penalized for breaking out of PPA, unless the power<br />
generation is substantially reduced due to factors beyond control of developer.<br />
Thiru. K.Venkatesan, SAC Member: Giving 3 months notice may arise only after the<br />
loan tenure. It may not be good for WEGs if TNEB is given the exit option by serving 3<br />
months notice.<br />
Thiru.S.V.Balasubramaniam, SAC Member: Some conditions may be specified for exit<br />
clause and penalty may be levied for exit from the agreement.<br />
Thiru. S.Pancharathinam, SAC Member: TNEB can exit, but generator should not be<br />
allowed to exit from the agreement.<br />
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Indian Renewable Energy Development Agency Limited: As a financier, IREDA<br />
wants that the agreement should be continued throughout the loan tenure. It may not be<br />
good for WEGs if TNEB is given the exit option by serving 3 months notice. The period<br />
of PPA should cover at least the entire loan period.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: If the WEGs winds up the operation before the expiry of<br />
the agreement period, 25% of the then prevailing purchase price for the balance<br />
agreement period based on the CUF adopted for working out the tariff may be imposed<br />
as penalty. A clause in the PPA should be included to break out of the PPA by either<br />
party after giving three months notice. Similarly if the WEGs are not operating the<br />
generator for a longer period, a time limit has to be set and penalty @ 10% generation<br />
loss has to be paid.<br />
23. ENERGY WHEELING AGREEMENT (EWA)<br />
M/s.Indian Wind Power Association: The Distribution Licensee and the WEGs should<br />
sit together and frame agreement and the same may be got approved by the<br />
Commission. Prior discussion with generators is required for finalizing model EPA/EWA .<br />
The benefits intended to be passed on to the investors should be available from the date<br />
of the order itself rather than linking it to the date of entering into a new agreement.<br />
Further, there could be an exit clause in the agreement after giving three months notice<br />
by either party and there should not be any penalty associated with it.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association: The draft EWA should be made available<br />
for the comments of the stakeholders.<br />
M/s.Winwind Power Energy Private Limited: EWA should be signed for five years<br />
tenure with a clause to extend the term on mutually agreed terms. There shall be an exit<br />
clause with reasonable notice period on mutually agreeable terms.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: If the Captive generators have not complied with the<br />
26% ownership and 51% consumption, the action to be taken has to be included in the<br />
agreement. If the wheeling charges and scheduling & system operation charges are not<br />
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paid for 2 months, wheeling may be discontinued. Agreement period may be for 5, 10,<br />
15 and 20 years period. Exit provisions may be given with some compensation. Entire<br />
energy sale to Board, surplus sale to surplus banking and vice versa change in utility of<br />
wind energy may be considered after one year of the agreement executed.<br />
24. PAYMENT OF SECURITY DEPOSIT TO TNEB<br />
M/s.Indian Wind Power Association: Agreed with the Commission’s suggestion of<br />
payment of two times of the maximum net energy supplied by the distribution licensee in<br />
a month in the previous banking period.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association: Payment of security deposit may be in<br />
accordance with the earlier order.<br />
M/s.Acciona Wind Energy Pvt. Ltd.: Security deposit period norms should not be<br />
changed to one calendar year.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: Security deposit at two times the net energy supplied<br />
during the year by the distribution licensee may be considered.<br />
25 ADJUSTMENT OF PEAK/OFF PEAK HOURS<br />
IWPA: Terminology used under this could be peak hour, night hour and other hour as in<br />
practice now rather than peak hour, off peak hour and normal hour. Adjustment of<br />
higher TOD slot units against lower TOD be allowed.<br />
Acciona Wind Energy Pvt. Ltd: For adjustment of peak/off peak power, the practice<br />
being followed in Maharashtra should be followed.<br />
TNEB: Unit to unit adjustment need not be considered. Interchanging of slots is not<br />
accepted by the Commission in order No.3 and the same was reiterated in the orders on<br />
MP No. 7 of 2007 and hence adjustment has to be made against the generation slots<br />
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only. Since banking is provided, adjusting higher tariff TOD slot in a lower tariff TOD slot<br />
need not be permitted.<br />
Thiru. K.Venkatesan, SAC member: Permitting the WEGs to adjust the energy<br />
generated in the higher ToD slot during the lower ToD slot is only beneficial to the<br />
TNEB. Therefore, TNEB can permit such adjustments.<br />
Thiru K.Nagaraju, M/s.Lakshmi Electrical Control System Ltd.,<br />
Adjustment of peak hour units to other slots should be allowed due to power cut.<br />
26. RESTRICTIONS ON SERVICE CATEGORY FOR CAPTIVE USE/THIRD PARTY<br />
SALE<br />
M/s.Indian Wind Power Association: Captive use of wind energy should be permitted<br />
for LT consumers also. This has become more relevant in the current context of the<br />
power crisis being faced in the State. As the gestation period for wind power project<br />
being small when compared with conventional power projects, it would not only result in<br />
increased capacity but would also ease the pressure on the TNEB to certain extent.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association: Captive user has to be preferentially<br />
treated when compared with the third party seller and both can not be treated equally.<br />
M/s.Acciona Wind Energy Pvt. Ltd.: WEGs should be allowed to adjust unit to unit for<br />
captive uses / third party sale in LT services also along with HT services and the due<br />
monitoring, accounting and billing system should be developed jointly by TNEB and<br />
SLDC.<br />
Indian Renewable Energy Development Agency Limited: The facilities on extending<br />
captive use/third party sale to LT services should be considered after the present<br />
accounting facilities available with TNEB/SLDC are enhanced to account for the same.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: LT open access /third party sale to LT services should<br />
not be allowed. Adjustment of any HT services may be accepted, but for the adjustment<br />
with commercial services, the coincident compensation charges may be given.<br />
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27. DEEMED DEMAND CHARGES<br />
M/s.Indian Wind Power Association: The CUF should not be multiplied by 0.65 which<br />
is a group / State phenomenon. The CUF should be taken as demand supplied by wind<br />
energy generators. Commission should allow 100% generation and maximum demand<br />
benefit to the consumers. Alternatively, the demand charges could be levied on net<br />
energy supplied by the distribution licensee based on actual generation data for each<br />
generator.<br />
M/s.SP Spinning Mills Pvt. Ltd: CUF should be only applied when the deemed<br />
demand is calculated on the installed capacity of the WEG. If the deemed demand is<br />
arrived on the basis of actual energy, CUF should not be applied as energy is already<br />
the result of applying the CUF on the capacity of the WEG. Many captive consumers are<br />
using almost 100% of the energy for their own use only. For such consumers the<br />
assumption of 65% adjustment for captive use and 35% sale to TNEB will not hold true<br />
for these individual consumers. This assumption will put these consumers at a heavy<br />
loss.<br />
M/s Acciona Wind Energy Pvt. Ltd: The demand charges payable by the wind energy<br />
user should be directly proportional only to the balance of the energy needs they are<br />
sourcing from the STU/Distribution Licensee.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: At present 55% of energy generated is for generator’s<br />
use and 45% of energy generated is purchased by TNEB and accordingly deemed<br />
demand should be calculated. However, the deemed demand concept may be deleted<br />
since the demand charges are meant to recover the fixed charges incurred by the Board<br />
for creating required facility towards capacity and meeting the demand of the consumer<br />
requiring power.<br />
28. SCHEDULING AND SYSTEM OPERATION CHARGES<br />
M/s.Indian Wind Power Association: Hon’ble Commission may waive the scheduling<br />
and system operation charges being levied on the power being generated from<br />
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enewable energy sources as a promotional measure. This will pave the way for larger<br />
investments into the sector.<br />
29. BANKING PROVISION AND CHARGES<br />
M/s.Indian Wind Power Association: A major boost to the growth of the wind sector in<br />
the State has been the provision for banking facility for a period of one year with 5%<br />
banking charges in kind. The provision for payment of the unconsumed banked units at<br />
75% of the procurement cost would be fair under normal circumstances, but not during<br />
restriction and control (R&C) period. WEGs are not permitted to use their own power due<br />
to imposition of R&C by TNEB. TNEB should be asked to pay at least 100% of the<br />
procurement tariff for wind power prevailing on the date to the investors irrespective of<br />
whether or not they have signed the new agreement. The WEGs can opt to sell other<br />
than the banked energy to the distribution licensee at the rate prescribed by the<br />
Commission. During the public hearing they stated that permission for availing banked<br />
units during R & C period in addition to the TNEB quota shall be given. The lapsed units<br />
shall be sold to TNEB or permission must be given to carry over the lapsed units to the<br />
forthcoming years without any time restrictions.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association: WEGs are not allowed to consume the<br />
whole of energy produced at the consumption end owing to restriction and control of<br />
power supply. Besides, the entire energy banked is also not allowed to be en-cashed.<br />
Draft of EWA needs to be revised incorporating necessary provisions for the TNEB’s<br />
failure to allow the consumer in not consuming the energy at his consumption end for<br />
any reason attributable to TNEB.<br />
M/s.Sri Amaravathi Spinning Mills: Due to power cut, the WEGs are not able to<br />
consume all the generated units and therefore requested the Commission that the<br />
banked units must be purchased by TNEB at Rs.2.70 per unit.<br />
M/s.Rogini Mills: TNEB has frequently and orally asked the WEGs to shut down their<br />
turbines for periods ranging from 9 hours to 20 hours a day during the season of six<br />
months in a year. Because of the shutdown during the peak period, even though wind is<br />
fully available the WEGs are not able to generate power. There is no clause in the EPA<br />
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for claiming compensation from TNEB for shutting down the turbines. Due to the<br />
introduction of slot to slot adjustment, the WEGs are not able to fully utilize the energy<br />
and lots of units are getting lapsed when the banking facility is closed. Even then<br />
banking charges are strictly charged by the Board.<br />
M/s.Acciona Wind Energy Pvt. Ltd: Banking should be allowed for 12 months but with<br />
nil charges<br />
M/s.Winwind Power Energy Private Limited: Banking charges should be made nil as<br />
in case of States like Maharashtra.<br />
Power Engineers society of <strong>Tamil</strong> <strong>Nadu</strong>: Banking may be permitted for one month<br />
alone and balance energy shall be waived. During the public hearing the society’s<br />
president stated that <strong>Electricity</strong> Act 2003 does not permit banking and hence banking<br />
arrangement should not be given to the WEGs.<br />
TNEB: This was the concession extended to promote wind energy in the early years.<br />
Now the bankable capacity has grown up to a significant extent and even poses a<br />
problem to grid management during the period of deficit situation. The banking facility<br />
should be restricted to one month instead of allowing yearlong banking and the banking<br />
charges should be increased to 15%. As Hon’ble High Court of Madras have stayed the<br />
matter relating to adjustment of banked energy to the captive users, the matter is<br />
subjudice.<br />
Thiru. S.Mohan Verghese Chunkath, CMD, TEDA and SAC member: Banking is<br />
necessary to protect the interest of the WEGs, but it is to be limited to one year. To fulfill<br />
the obligation as prescribed in the Act/NEP/NTP, TNEB has to purchase the balance<br />
power from renewable sources.<br />
Thiru. K.Venkatesan, SAC member: Banking facility is a concession given to the<br />
generators. The WEGs have to sell the surplus energy to distribution licensee or bank<br />
the energy.<br />
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Thiru. T.B.Chikkoba, SAC member: If TNEB don’t bank the energy, they should<br />
purchase the wind energy at the rate prescribed by the Commission. If there is a power<br />
cut, the WEGs have to be allowed either to consume the energy or to sell to TNEB at the<br />
rate prescribed by the Commission.<br />
Thiru K.Nagaraju, M/s.Lakshmi Electrical Control System Ltd.,<br />
Surplus units can be carry over to the next year to those people who have not signed<br />
agreement with TNEB.<br />
Thiru S.V.Angappan, GS, TNEB Accounts & Executive staff union.<br />
Banking shall be left to the decision between distribution licensee and WEGs.<br />
30. CROSS SUBSIDY SURCHARGES<br />
M/s.Indian Wind Power Association: There should not be any cross subsidy charges<br />
for generation from renewable energy sources.<br />
M/s.<strong>Tamil</strong>nadu Spinning Mills Association: The Cross subsidy charge at 50% of the<br />
level prescribed for generation from non-conventional energy sources is too high,<br />
considering the National <strong>Electricity</strong> Policy and also the related provisions of the<br />
<strong>Electricity</strong> Act, 2003, particularly on the aspect of promotion of electricity generation<br />
through non-conventional energy sources. The cross subsidy charges proposed may be<br />
dropped.<br />
M/s.Indian Wind Energy Association: Open access transactions involving renewable<br />
power such as wind energy, should be exempted from levy of cross subsidy surcharge<br />
and the open access consumers availing renewable power should not be subjected to<br />
payment of surcharge since the cross subsidy surcharge formula introduced in the<br />
National Tariff Policy does not include the NCES sources.<br />
M/s.Indian Wind Turbine Manufacturers Association: As per the formula prescribed<br />
by the National <strong>Electricity</strong> Policy, the cross subsidy surcharge is independent of<br />
renewable energy sources. Therefore power from conventional sources is not<br />
comparable even at marginal level. The other States like Maharashtra, Gujarath,<br />
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Karnataka, Rajasthan and Andhra Pradesh have exempted wind from cross subsidy<br />
surcharge. Removal of cross subsidy payment for wheeling to third parties is suggested.<br />
M/s.Acciona Wind Energy Pvt. Ltd: The cross subsidy surcharge should be made nil<br />
as being considered in the State of Gujarat.<br />
M/s.Winwind Power Energy Private Limited: Third party sale should be provided with<br />
all incentives and should not be burdened with any extra surcharges. Therefore, cross<br />
subsidy charges should not be levied for third party sales for wind power generation.<br />
Power Engineers Society of <strong>Tamil</strong> <strong>Nadu</strong>: Commission may be firm on cross subsidy<br />
surcharges as this is a social commitment. No justification in waiving the cross subsidy<br />
and the poor people will get affected<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: Cross subsidy surcharge may be uniformly levied both<br />
on the conventional and non conventional energy sources.<br />
31. TRANSMISSION AND WHEELING CHARGES<br />
M/s.Indian Wind Power Association: Initially TNEB assured only 2% of wheeling<br />
charges and therefore more WEGs have been established. Subsequently the wheeling<br />
charges have been increased to 5%. To encourage wind energy in our state, the present<br />
system should be continued.<br />
M/s.Acciona Wind Energy Pvt. Ltd: Charges for Transmission, Wheeling and line<br />
losses charges should be reduced to 4% in line with other States to promote NCES<br />
generation.<br />
Thiru.S.V.Balasubramaniam, SAC Member: Already the potential windy sites are<br />
occupied and only the lesser windy sites are available. Therefore it is not reasonable to<br />
charge more than 5%. If we increase the wheeling charges, the investment in the wind<br />
energy will come down.<br />
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Dr. M.Abdullah Khan, SAC Member: We have to conduct a study on determining the<br />
losses. Methods for calculating the losses should be prescribed.<br />
Thiru. K.Venkatesan, SAC Member: It is better to adopt a reality figure of wheeling<br />
charges.<br />
Thiru. T.B.Chikkoba, SAC Member: The tariff rate for industries is Rs.3.50 per kWh<br />
and 65% of the wind energy is being used for captive purpose since captive use is<br />
advantageous for WEGs. Increase in wheeling charge by 1% or 2% can only be on<br />
ad-hoc basis. In the earlier days, the generated wind energy might have been consumed<br />
locally. But nowadays, due to higher capacity addition of WEGs, the generated power<br />
has to be transferred from one place to another place. Hence loss will be more than 5%.<br />
Preferential treatment has to be given to wind power and the present system of 5%<br />
wheeling charges may be continued.<br />
Power Engineers Society of <strong>Tamil</strong> <strong>Nadu</strong>: As the capital cost is heavy, the open<br />
access charges shall be made same for all. IDC should be charged with the promoters<br />
or the promoters themselves can lay the transmission line.<br />
<strong>Tamil</strong> <strong>Nadu</strong> <strong>Electricity</strong> Board: We have invested much in transmission sector for wind<br />
power evacuation. Our transmission assets are idle for many months. The transmission,<br />
wheeling charges and losses in kind fixed by the Commission in order No.3 is very<br />
meager at 5% of the energy which will not cover the losses approved by the Commission<br />
in the order No.2. Not withstanding the collection of the IDC amount, the transmission<br />
charges have to be fixed separately in rupees per MW per day basis and the wheeling<br />
charges shall be enhanced from 5% to 15% separately.<br />
32. OTHER ISSUES<br />
M/s.Indian Wind Power Association: Even though the Commission revised the Open<br />
Access Regulations by reducing the open access application fee, open access<br />
registration fee and the scheduling and system operation charges, TNEB is yet to<br />
implement these changes. The investors who have invested in wind electric generators<br />
for the purpose of selling the power generated to TNEB have not been receiving the<br />
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payments on time. These factors have affected the morale of the investors and they<br />
have lost their confidence in investing in <strong>Tamil</strong> <strong>Nadu</strong>. No scheduling and system<br />
operation charges be levied.<br />
M/s.Sugavaneswara Spinning Mills Private Limited: <strong>Tamil</strong> <strong>Nadu</strong> is now witnessing an<br />
acute shortage of power and the same status may continue for few more years. Hence it<br />
is necessary to encourage installation of more WEGs in this State and full support<br />
should be provided to get maximum benefits.<br />
Thiru Singhan Ragu: Possibility of providing huge capacity off shore wind farm may be<br />
explored and encouraged to derive benefit by way of economy of scale, efficiency in<br />
operation, reduction in capital and operational expenditure and to facilitate<br />
implementation of competitive tariff bidding in the long run.<br />
Thiru S.Gandhi : Power Engineers Society of <strong>Tamil</strong> <strong>Nadu</strong><br />
Only 6 days are given for preparation of public hearing and the <strong>Tamil</strong> version of the<br />
consultative paper have not been posted in the Commission’s website. Wind power is<br />
infirm in nature and not facilitating TNEB, TNEB consolidate all kind of power and<br />
distribute. TNEB has not made any study on the impact of TNEB grid due to 4200 MW<br />
WEGs because they are all inductive in nature. As per Europian standards the fault level<br />
in each feeder can not be more than 5%. But due to WEGs, the fault level is more. In the<br />
state of Kerala the tie feeders with the WEGs are directly connected to the bus bar of the<br />
substation. But in <strong>Tamil</strong> <strong>Nadu</strong> it is not so. Due to WEGs 36,000 acres of land is barren<br />
and there is no agricultural production in these lands. Consultative paper reflects the<br />
policy of privatizing the profits and socializes the losses.<br />
Thiru K.Periasamy, Director (Technical), M/s.Precision Equipments (P) Ltd.<br />
Pumped storage power plant may be categorized under NCES as it reduces the peak<br />
load. Solar power plant can be encouraged only in the villages where standalone system<br />
is required. NCES sources shall be encouraged only when it is economically viable.<br />
Power Plants with de-salination shall also comes under NCES.<br />
Thiru M.R.Krishnan, Consumer Association of India<br />
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The time given by the Commission for public hearing is not sufficient for preparing the<br />
notes. Commission can review the performances of service providers. Most of the<br />
assumptions in the consultative paper is based on the better parts of the other<br />
Commission reports.<br />
Thiru V Mageswaran, Unorganised workers federation<br />
Consumer burden should be reduced. Solar and wind energy should be promoted under<br />
public sector projects. Land is affected due to wind energy project.<br />
Thiru S.V.Angappan, General Secretary, TNEB Accounts & Executive Staff Union<br />
TNEB does not have the capacity to buy the costly power. Tariff should be revised so<br />
that TNEB will have sufficient RoE.<br />
Thiru Yuvaraj, <strong>Tamil</strong> <strong>Nadu</strong> Farmers Sangam, Kumbakonam,<br />
Supply is not available even for 6 hours a day for agriculture purpose in last month in<br />
Tanjore area. At least 8 hours supply should be given to the agriculture sector. Farmers<br />
are not getting higher rate for baggase. WEGs may be encouraged.<br />
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Annexure -VII<br />
GUIDELINES OF THE GOVERNMENT OF INDIA ON POWER GENERATION<br />
FROM NON-CONVENTIONAL ENERGY SOURCES<br />
179
Annexure -VII<br />
GUIDELINES FOR PROMOTIONAL AND FISCAL INCENTVIES BY STATE<br />
GOVERNMENTS FOR POWER GENERATION FROM NON-CONVENTIONAL<br />
ENERGY SOURCES<br />
1. OPERATIVE PERIOD<br />
The scheme of promotional and fiscal incentives will come into operation<br />
with immediate effect and will remain in force for a period of five years.<br />
ELIGIBLE PRODUCERS<br />
Those generating electricity and feeding in full or part to the State Grid<br />
from Non-Conventional Energy Sources such as wind electric generators, small<br />
hydro plants, biomass combustion and co-generation, etc., there will be no<br />
restriction on generation capacity or supply of electricity to the grid. Consortia or<br />
co-operatives will also be eligible.<br />
2. GRID INTERFACING<br />
i) Interfacing, including transformers, panels, kiosk, protection, metering,<br />
H.T. lines from the points of generation to the Board’s nearest HT lines, etc., as<br />
well as maintenance, will be undertaken by the producer as per the<br />
specifications and requirements by the producer as per the specifications and<br />
requirements of the Board, for which he will bear the entire cost. Alternatively,<br />
these works and their maintenance could be undertaken by the Board, at<br />
charges to be decided by the board.<br />
ii) Depending upon the generation capacity, if the sub-station capacity at<br />
33/11 KV or higher levels is required to be augmented or 66 KV or higher<br />
capacity transmission lines are to be provided, this will be undertaken by the<br />
Board, at their cost.<br />
iii) Two separate meters one for the export of power to the grid, and another<br />
for import from the grid, will be installed on the HT side by the producer. The<br />
meters and metering boxes will be sealed by the Board.<br />
iv) Necessary current limiting devices such as thyristors will be installed in the<br />
generating equipment of the producer. Capacitors of sufficient rating will also be<br />
provided in the equipment to ensure that the power factor is always maintained<br />
above 0.80<br />
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3. FACILITY BY SEB<br />
i) Wheeling<br />
The State <strong>Electricity</strong> Board will undertake to transmit on its grid the power<br />
generated, and make it available to the producer for captive use or to a Third<br />
Party within the State, at a uniform wheeling charge of 2 % of the energy fed to<br />
the Grid, irrespective of the distance from the generating station. The Third<br />
Party must be a H.T. Consumer of the Board, unless this stipulation is relaxed<br />
specifically by the SEB.<br />
ii)<br />
Banking<br />
The State <strong>Electricity</strong> Board will permit the electricity generated to be<br />
banked for a period upto to one year..<br />
iii)<br />
Sale of Power<br />
The State <strong>Electricity</strong> Board will purchase electricity offered by the<br />
producer at a minimum rate of Rs.2.25 /unit, with no restriction on time or<br />
quantum of electricity supplied for sale. This rate will be reviewed every year,<br />
and will be linked to standard criteria such as wholesale price index. The<br />
producer will also have the option to sell the electricity generated by him to a<br />
Third Party within the State (as defined 3 (i) above), at a rate to be mutually<br />
settled between them.<br />
iv) All transactions between the Board and the producer involving<br />
wheeling, banking or sale of power will be settled on a monthly basis.<br />
v) Exemption from duty<br />
Consumption of electricity generated by the producer will be exempted<br />
from electricity duty.<br />
vi)<br />
Exemption from demand cut<br />
The exemption from demand cut to the extent of 30% of the installed<br />
capacity of the producer will be given by the Board.<br />
4. OTHER INCENTIVES<br />
i) Sales Tax benefits will be available to the producer, who owns the<br />
project (Resolution of the Govt., off Gujarat <strong>dated</strong> 27 th January, 1993 is<br />
enclosed for guidance)<br />
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ii) The producer will be allowed to use the water for power generation.<br />
Royalty on the water used for small hydro projects will be charged at a rate not<br />
exceeding 10% of the prevailing electricity tariff for HT consumers.<br />
iii) Power generation from non-conventional energy sources will be treated<br />
like any other industry, and incentives normally available to new industrial units<br />
can be availed.<br />
iv) Concessions given to industrial units in backward areas will be provided,<br />
such as exemption from taxes and duties, capital subsidies, etc.,<br />
v) Infrastructural facilities such as approach roads, water supply, crane,<br />
power during construction period, etc., will be provided on the lines of<br />
industrial estates.<br />
5. APPLICATION AND CLEARANCES<br />
i) Producers should submit their application for setting up the project and<br />
for grid interface in the Proforma to the State Nodal Agency / State <strong>Electricity</strong><br />
Board (simple composite application form should be devised which include all<br />
statutory approvals such as Chief Electrical Inspector, etc., )<br />
ii) Clearance will be provided within a period of two months from the date of<br />
application.<br />
iii) An agreement will be entered into with the producer within a period of<br />
one month from the date the clearance is provided.<br />
iv) If the applicant does not take effective steps (i.e., at least 10 % of the<br />
total project cost should be incurred ) to implement the project within six<br />
months from the date of obtaining possession of land, the Agreement could be<br />
terminated and the site allotted to another applicant. If, on the other hand, land<br />
is not provided within three months from the date of Agreement, the applicant will<br />
have the option to terminate the Agreement.<br />
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GUIDELINES FOR FIXATION OF PURCHASE<br />
PRODUCED FROM NON-CONVENTIONAL ENERGY<br />
PRICE FOR POWER<br />
1. The State <strong>Electricity</strong> Board will announce a base purchase price every<br />
year for the electrical energy purchased by it from non-conventional energy<br />
based power projects. These rates shall be valid from 1 st April to 31 st March of<br />
the following year.<br />
The base electrical energy purchase price valid for 1994-95 shall be a<br />
minimum of Rs. 2.25 / kWh.<br />
The base price shall be escalated at a minimum rate of 5% every year.<br />
Announcement of revised base prices shall be made by the SEB on 1 st April<br />
every year.<br />
The base prices shall be applicable to all non-conventional energy<br />
based power projects based on solar, wind, hydro, biomass, etc., for which<br />
Power Purchase Agreements are signed during a year.<br />
2. A promoter / developer shall be entitled to receive the base price set out<br />
in PPA for all electrical energy delivered from his project to the State grid for the<br />
duration of the Power Purchase Agreement. The rate shall be equal to the base<br />
price in the year of signing of PPA, escalated at a rate of 5% per year for a<br />
period of 10 years, from the date of signing of the Power Purchase Agreement.<br />
From the end of the 10 th year, and for the remaining duration of the Power<br />
Purchase Agreement, the new purchase price shall be equal to the purchase<br />
price at the end of the 10 th year, or the High Tension (HT) tariff prevalent in the<br />
State at that time, whichever is higher.<br />
3. A monthly invoice shall be submitted by the promoter / developer to the<br />
State <strong>Electricity</strong> Board, at its designated offices, for the net electricity supplied by<br />
him to the Board. The Board shall make payment of amounts due, calculated at<br />
the purchase price for that particular year, within a period of 30 days.<br />
The Board shall also provide facilities of an escrow amount or an<br />
irrevocable, transferable, divisible and confirmed standby letter of credit issued<br />
by State Bank of India, or another nationalized bank, acceptable to the promoter /<br />
developer. The amount of the letter of credit shall be equal to the expected total<br />
of two years payment by the Board.<br />
The ensure prompt realization of the dues, and in order to provide a<br />
security cover, the Board shall issue ‘<strong>Electricity</strong> Credit Notes’ to the promoter /<br />
developer equivalent to the amount of electricity received by the Board,<br />
whenever it is unable to pay in cash within the stipulated period. The <strong>Electricity</strong><br />
Credit Notes shall be transferable to one or more High Tension consumers of<br />
the Board, who will be allowed to adjust the amount for which the Credit Notes<br />
183
have been issued, from their electricity bills due to the Board. The validity of<br />
Credit Notes shall be six months.<br />
4. The duration of the Power Purchase Agreement shall be a minimum of 20<br />
years, which could be extended by another 10 year, through mutual agreement.<br />
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Annexure – VIII<br />
Components of wind energy tariff<br />
(upto 31-03-2009)<br />
Sl.No Parameters Values<br />
1 CUF 27.15%<br />
2 De-rating factor 1% for every year after ten years<br />
3 Life of the plant 20 Years<br />
4 Capital investment Rs. 5.35 Crores<br />
5 Debt : Equity ratio 70:30<br />
6 Interest on loan 12.00%<br />
7 Loan repayment period 10 years with 1 year moratorium period<br />
8 Return on equity 17.63% Pre-Tax<br />
9 O&M charges for machinery on 85% of capital investment 1.10% with escalation of 5% from 2nd year<br />
10 O&M Charges for civil works on 15% of capital investment 0.22% with escalation of 5% from 2nd year<br />
11 Insurance charges on 85% of capital Investment 0.75% with reduction of 0.50% after 1 year<br />
12 Depreciation on 85% of capital investment 4.5% SLM<br />
13 Residual value 10%<br />
185
Components of wind energy tariff<br />
(01-04-2009 to 31-03-2011)<br />
Annexure – IX<br />
S.No Parameters Values<br />
1 CUF 27.15%<br />
2 De-rating factor 1% for every year after ten years<br />
3 Life of the plant 20 years<br />
4 Capital investment Rs. 5.35 Crores<br />
5 Debt : Equity ratio 70:30<br />
6 Interest on loan 12.00%<br />
7 Loan repayment period 10 years with 1 year moratorium period<br />
8 Return on equity 19.85% Pre-Tax<br />
9 O&M charges for machinery on 85% of capital investment 1.10% with escalation of 5% from 2nd year<br />
10 O&M Charges for civil works on 15% of capital investment 0.22% with escalation of 5% from 2nd year<br />
11 Insurance charges on 85% of capital Investment 0.75% with reduction of 0.50% after 1 year<br />
12 Depreciation on 85% of capital investment 4.5% SLM<br />
13 Residual value 10%<br />
186
Years<br />
O & M charges at 1.10% for<br />
machinery on 85% of capital<br />
investment and at 0.22% for civil<br />
works on 15% of capital<br />
investment with 5% escalation<br />
every year from 2nd year<br />
(Rs)<br />
Working sheet of tariff computation (upto 31-03-2009)<br />
Insurance at<br />
0.75% and<br />
reduction of<br />
0.5% every<br />
year after one<br />
year<br />
(Rs)<br />
Interest on<br />
loan @<br />
12.00%<br />
(Rs)<br />
Depreciation at<br />
4.5% on<br />
85% of capital<br />
investment<br />
(Rs)<br />
Return on<br />
equity<br />
@17.63%<br />
Pre-Tax<br />
(Rs)<br />
Total Cost<br />
(Rs)<br />
Annexure – X<br />
Units<br />
generated for<br />
1 MW (derating<br />
@1%<br />
for every year<br />
after ten<br />
years)<br />
(Rs)<br />
Cost<br />
per unit<br />
1 517880 341063 4494000 2046375 2829615 10228933 2378340 4.301<br />
2 543774 339357 4494000 2046375 2829615 10253121 2378340 4.311<br />
3 570963 337660 4044600 2046375 2829615 9829213 2378340 4.133<br />
4 599511 335972 3595200 2046375 2829615 9406673 2378340 3.955<br />
5 629486 334292 3145800 2046375 2829615 8985569 2378340 3.778<br />
6 660961 332621 2696400 2046375 2829615 8565971 2378340 3.602<br />
7 694009 330958 2247000 2046375 2829615 8147956 2378340 3.426<br />
8 728709 329303 1797600 2046375 2829615 7731602 2378340 3.251<br />
9 765145 327656 1348200 2046375 2829615 7316991 2378340 3.077<br />
10 803402 326018 898800 2046375 2829615 6904210 2378340 2.903<br />
11 843572 324388 449400 2046375 2829615 6493350 2354557 2.758<br />
12 885751 322766 2046375 2829615 6084507 2331011 2.610<br />
13 930038 321152 2046375 2829615 6127180 2307701 2.655<br />
14 976540 319546 2046375 2829615 6172076 2284624 2.702<br />
15 1025367 317949 2046375 2829615 6219306 2261778 2.750<br />
16 1076635 316359 2046375 2829615 6268984 2239160 2.800<br />
17 1130467 314777 2046375 2829615 6321234 2216768 2.852<br />
18 1186990 313203 2046375 2829615 6376184 2194601 2.905<br />
19 1246340 311637 2046375 2829615 6433967 2172655 2.961<br />
20 1308657 310079 2046375 2829615 6494726 2150928 3.019<br />
Average tariff for 20 years 3.24<br />
(Rs)<br />
187
Working sheet of tariff computation (01-04-2009 to 31-03-2011)<br />
Annexure – XI<br />
Years<br />
O & M charges at 1.10% for<br />
machinery on 85% of capital<br />
investment and at 0.22% for civil<br />
works on 15% of capital<br />
investment with 5% escalation<br />
every year from 2nd year<br />
(Rs)<br />
Insurance at<br />
0.75% and<br />
reduction of<br />
0.5% every<br />
year after one<br />
year<br />
(Rs)<br />
Interest on<br />
loan @<br />
12.00%<br />
(Rs)<br />
Depreciation at<br />
4.5% on<br />
85% of capital<br />
investment<br />
(Rs)<br />
Return on<br />
equity<br />
@19.85%<br />
Pre-Tax<br />
(Rs)<br />
Total Cost<br />
(Rs)<br />
Units<br />
generated for<br />
1 MW (derating<br />
@1%<br />
for every year<br />
after ten<br />
years)<br />
(Rs)<br />
Cost<br />
per unit<br />
(Rs)<br />
1 517880 341063 4494000 2046375 3185925 10585243 2378340 4.451<br />
2 543774 339357 4494000 2046375 3185925 10609431 2378340 4.461<br />
3 570963 337660 4044600 2046375 3185925 10185523 2378340 4.283<br />
4 599511 335972 3595200 2046375 3185925 9762983 2378340 4.105<br />
5 629486 334292 3145800 2046375 3185925 9341879 2378340 3.928<br />
6 660961 332621 2696400 2046375 3185925 8922281 2378340 3.751<br />
7 694009 330958 2247000 2046375 3185925 8504266 2378340 3.576<br />
8 728709 329303 1797600 2046375 3185925 8087912 2378340 3.401<br />
9 765145 327656 1348200 2046375 3185925 7673301 2378340 3.226<br />
10 803402 326018 898800 2046375 3185925 7260520 2378340 3.053<br />
11 843572 324388 449400 2046375 3185925 6849660 2354557 2.909<br />
12 885751 322766 2046375 3185925 6440817 2331011 2.763<br />
13 930038 321152 2046375 3185925 6483490 2307701 2.810<br />
14 976540 319546 2046375 3185925 6528386 2284624 2.858<br />
15 1025367 317949 2046375 3185925 6575616 2261778 2.907<br />
16 1076635 316359 2046375 3185925 6625294 2239160 2.959<br />
17 1130467 314777 2046375 3185925 6677544 2216768 3.012<br />
18 1186990 313203 2046375 3185925 6732494 2194601 3.068<br />
19 1246340 311637 2046375 3185925 6790277 2172655 3.125<br />
20 1308657 310079 2046375 3185925 6851036 2150928 3.185<br />
Average tariff for 20 years 3.39<br />
188
Determination of Capacity Utilization Factor<br />
Annexure – XII<br />
MANUFACTURE<br />
R<br />
SUZLON<br />
(KW)<br />
NEPC<br />
(KW)<br />
NEG<br />
(KW)<br />
NEG<br />
(KW)<br />
ENERCON<br />
(KW)<br />
ENERCON<br />
(KW)<br />
GE<br />
WIND<br />
(KW)<br />
VESTAS<br />
(KW)<br />
PIONEER<br />
(KW)<br />
SUZLON<br />
(KW)<br />
Location 1250 225 750 1650 330 800 1500 500 850 600 1650<br />
Muppandal Pass<br />
Sankaneri (kWh) 3451177 566542 1765938 5268364 975489 2479825 4047019 1518963 2428292 --- ---<br />
Average (kWh) 3451177 566542 1765938 5268364 975489 2479825 4047019 1518963 2428292 --- ---<br />
Per MW 2760942 2517964 2354584 3192948 2956027 3099781 2698013 3037926 2856814 --- ---<br />
Average for 1 MW for this Pass (kWh) 2830555<br />
CUF in % for Muppandal Pass 32.31<br />
Shencottah Pass<br />
Nettur area<br />
(kWh)<br />
2883763 477916 1539787 4082584 803514 1927777 3413688 1222158 1871506 --- ---<br />
Azhagia<br />
pandipuram area 3191647 500438 1705083 4576922 842849 2111923 3774362 1278716 2098925 --- ---<br />
(kWh)<br />
Mangalapuram<br />
area (kWh)<br />
3291703 524250 1740286 4763848 885449 2142199 3875167 1360406 2216306 --- ---<br />
Average (kWh) 3122371 500868 1661718 4474451 843937 2060633 3687739 1287093 2062246 --- ---<br />
Per MW 2497897 2226080 2215625 2711789 2557386 2575791 2458493 2574187 2426171 --- ---<br />
Average for 1 MW for this Pass (kWh) 2471491<br />
CUF in % for Shencottah Pass 28.21<br />
Palaghat Pass<br />
Poolavadi (kWh) 3229658 499718 1704126 4694174 850155 2137694 3814840 1294612 2147500 --- ---<br />
Edayarpalayam<br />
(kWh)<br />
3101280 483064 1612606 4564045 829404 2031763 3628343 1270972 2116766 --- ---<br />
Myvadi (kWh) 2820648 438877 1482499 4087443 747757 1868172 3314212 1142472 1886054 --- ---<br />
Pushpathur<br />
(kWh)<br />
--- --- --- --- --- 1401600 --- --- --- 1204150 ---<br />
VESTAS<br />
(KW)<br />
189
Poosaripatti<br />
(kWh)<br />
2406758 384795 1199719 3848077 681581 1744199 2786040 1069373 1794121 --- ---<br />
Arasampalayam<br />
(kWh)<br />
2680715 410859 1353577 4169738 720571 1782634 3114481 1127645 1974238 --- ---<br />
Mettukadai (kWh) 2318485 353181 1188819 3493407 618246 1549612 2713844 947782 1615268 --- ---<br />
Pongalur (kWh) 2522864 388530 1305183 3747482 671445 1674493 3582486 1028132 1728169 --- ---<br />
Average (kWh) 2725773 422718 1406647 4086338 731308 1773771 3279178 1125855 1894588 1204150 ---<br />
Per MW 2180618 1878745 1875529 2476568 2216086 2217214 2186119 2251711 2228927 2006917 ---<br />
Average for 1 MW for this Pass (kWh) 2151843<br />
CUF in % for Palaghat Pass 24.56<br />
Cumbum Pass<br />
Andipatti (kWh) --- --- --- --- --- --- --- --- --- --- 4399798<br />
Average (kWh) --- --- --- --- --- --- --- --- --- --- 4399798<br />
Per MW --- --- --- --- --- --- --- --- --- --- 2666544<br />
Average for 1 MW for this Pass (kWh) 2666544<br />
CUF in % for Cumbum Pass 30.44<br />
Abstract<br />
Name of the Pass Exploitable Capacity (MW) CUF in %<br />
Muppandal Pass 75 32.31<br />
Shencottah Pass 650 28.21<br />
Palaghat Pass 668 24.56<br />
Cumbum Pass 200 30.44<br />
1593 27.15<br />
Total exploitable capacity = 1593 MW<br />
Weighted average CUF = 27.15%<br />
190